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GLOBAL MARKETS-U.S. dollar, bond yields rise after Trump promises tax plan
February 9, 2017 / 8:03 PM / 8 months ago

GLOBAL MARKETS-U.S. dollar, bond yields rise after Trump promises tax plan

* US dollar jumps, Treasury yields rise on Trump tax comments

* World stock indexes gain on rosy results

* Oil extends gains on gasoline drawdown (Adds settled oil prices; updates throughout)

By Hilary Russ

NEW YORK, Feb 9 (Reuters) - The U.S. dollar and bond yields rose on Thursday after comments from President Donald Trump that he would be releasing his “phenomenal” tax plan in the next few weeks.

Investors have been waiting for details on Trump’s election campaign pledge to stimulate economic growth with large-scale fiscal stimulus through infrastructure spending and tax cuts.

In a meeting with airline executives at which Trump talked about the need to modernize the U.S. air traffic control system, the president also said his administration will be announcing “something phenomenal in terms of tax” over “the next two or three weeks”.

The U.S. dollar rose more than 1 percent against the yen to a six-day high, the euro fell to the day’s low against the dollar, and the greenback saw a one-week high against the Swiss franc.

Benchmark 10-year note yields reached a high of 2.3948 percent after seeing a three-week low of 2.325 percent Wednesday.

“It’s been a broad-based dollar rally, driven by the headlines that Trump plans to announce something phenomenal on taxes in the next few weeks, in his words,” said Kathy Lien, managing director of BK Asset Management.

“That was really the crux of the dollar rally shortly after his election and I think investors are getting really excited about that again.”

The dollar had gained more than 5 percent against a basket of major currencies in the six weeks after Trump’s election but has given back some of those gains since as Trump has focused more on trade and immigration than fiscal stimulus.

Major world stock indexes also climbed on Thursday as investors took inspiration from corporate earnings and put aside for now the political risks that have dominated markets this week.

Investors had in recent weeks been pondering the potential impact of the protectionist policies of President Trump and the threat of similar policies resulting from upcoming European elections in France and Germany.

Wall Street’s three main indexes hit record highs on Thursday, amid gains across most sectors, led by financial and energy stocks.

The S&P 500 financial index rose 1.37 percent as bond yields rose and was on track to snap a three-day losing streak after Trump’s statements.

The Dow Jones Industrial Average rose 144.02 points, or 0.72 percent, to 20,198.36, the S&P 500 gained 15.69 points, or 0.68 percent, to 2,310.36 and the Nasdaq Composite added 38.32 points, or 0.67 percent, to 5,720.78.

U.S. crude oil futures rose 1.26 percent, or 33 cents, to settle at $53.00 per barrel, extending gains to the second day, supported by an unexpected drawdown in U.S. gasoline inventories.

Benchmark Brent crude was up 54 cents a barrel, or 0.98 percent, at $55.66.

“I think this is another ‘Trump On’ trade day, where we’re finally seeing some of the proposed policies being put into place,” said Chris Gaffney, president of world markets at EverBank.

The pan-European STOXX 600 index closed 0.78 percent higher. French lender Societe Generale reported lower fourth-quarter net income that nonetheless beat analysts’ forecasts and its shares added 2.29 percent.

Concern over the impact of elections in France and Germany this year saw investors sell bonds of lower-rated euro zone countries earlier this week. However, yields started falling late on Wednesday and fell further on Thursday.

French 10-year government bond yields fell below 1.0 percent for the first time in two weeks.

The final round of France’s presidential election in three months is expected to include far-right, anti-euro candidate Marine Le Pen.

Yields on German 10-year bonds, seen as among the world’s safest assets, edged down 0.6 bps to 0.30 percent.

Japanese shares fell 0.5 percent, a day before Prime Minister Shinzo Abe meets Donald Trump.

Additional reporting Yashaswini Swamynathan in Bengaluru; Henning Gloystein in Singapore; Editing by Clive McKeef and Nick Zieminski

Our Standards:The Thomson Reuters Trust Principles.
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