Dollar higher tracking Trump, Japan and Spain

LONDON: The dollar climbed against rivals Monday, helping to push up European and Japanese stock markets, as investors tracked hopes for US President Donald Trump’s tax cut plans, Japan’s election result and ongoing tensions in Spain.

Tokyo’s main stocks index extended its longest winning streak in its nearly 70-year history on the re-election of Shinzo Abe as prime minister.

“While the political backdrop in Japan looks much more stable than it has in years the backdrop in Europe continues to be fraught with risk,” said Michael Hewson, market analyst at CMC Markets UK, in particular reference to “the crisis in Catalonia”.

US markets powered to all-time highs on Friday after senators voted for a federal budget plan that permits them to introduce Trump’s planned tax cuts with a simple majority vote instead of a 60-40 majority.

While there is a long way to go for the proposals to be implemented, the news provided a boost to already optimistic investors.

Expectations that Trump’s tax cuts and big spending plans would boost the economy helped drive a months-long global markets rally that began after his November election. However, a series of White House crises and legislative setbacks pared those gains.

– Rate rises –

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Forex traders, betting the cuts will fan inflation and in turn lead to further US interest rate rises, pushed the dollar higher Monday.

“The budget clears a hurdle to the much anticipated Trump tax cuts, which in turn are expected to both improve the US economic and earnings outlook while at the same time strengthening hawks at the Fed’s hand to pursue at least four rate hikes in the next 14 months,” said Greg McKenna, market strategist at AxiTrader.

In Europe on Monday, stock markets pushed higher with the exception of Madrid.

And the euro struggled with the fallout from Spain’s Catalonia crisis after the national government imposed direct rule on the region following a controversial independence vote.

Meanwhile in Japan, Abe’s resounding victory in the weekend’s general election, which gives him a mandate to press on with his easy money, big-spending “Abenomics” programme to kickstart the Japanese economy.

Tokyo’s traders welcomed the latest developments, sending the Nikkei surging 1.1 percent — a record 15th straight gain — with the index helped also by a weaker yen boosting shares in exporters.

– Key figures around 1015 GMT –

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London – FTSE 100: UP 0.2 percent at 7,534.41 points

Frankfurt – DAX 30: UP 0.5 percent at 13,057.6

Paris – CAC 40: UP 0.6 percent at 5,405.88

Madrid – IBEX 35: DOWN 0.1 percent at 10,212.0

EURO STOXX 50: UP 0.6 percent at 3,625.27

Tokyo – Nikkei 225: UP 1.1 percent at 21,696.65 (close)

Hong Kong – Hang Seng: DOWN 0.6 percent at 28,305.88 (close)

Shanghai – Composite: UP 0.1 percent at 3,380.70 (close)

New York – DOW: UP 0.7 percent at 23,328.63 (close)

Euro/dollar: DOWN at $1.1741 from $1.1781 at 2100 GMT Friday