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FTSE and pound rally on Brexit and Trump tax plan

Pound jumps after European parliament member says he is 'astonished' at Brexit progress, as global markets rally on passing of US tax cuts.

 
FTSE and pound rally on Brexit and Trump tax plan
 

Update: The pound has rallied after a member of the European parliament's Brexit group said he was 'astonished' at the progress made on the UK's 'divorce bill'.

Elmar Brok said there was a 'very good chance' of a deal and that differences remained over 'just a few words', according to Reuters.

That sparked a rally in the pound, which jumped 0.4% against the dollar to $1.351, despite the US currency's strength following the US Senate's passing of president Donald Trump's tax cut programme.

The euro fell 0.7% against the pound to trade at 87.6p.

'The pound has leapt off the back of comments coming out of Europe that progress has been made,' said Hamish Muress, currency analyst at OFX.

'Despute the fine details of a draft agreement being unlikely to be resolved until next week, the pound will be buoyed that, for the time being, it looks like the EU will vote in favour of progressing talks to the next phase.'

The pound's rally pared the FTSE 100 gains, with the UK blue-chip index falling from a high of 7,366 in the morning's trading to 7,336, still up 36 points or 0.5%, on the day.

A stronger pound tends to hurt the FTSE 100, whose members rely on overseas markets for around three-quarters of their earnings.

In the US, the Dow Jones and S&P 500 both opened at all-time highs, buoyed by the passing of Donald Trump's tax cut plans in the US Senate.

(10:18) FTSE rallies on Trump tax victory 

The FTSE 100 has rallied after the US Senate passed president Donald Trump's tax plan, with investors buoyed by the prospect of big cuts for corporations by the end of the year.

The narrow victory in the early hours of Saturday morning sparked a bullish open for global markets. The FTSE 100 was up 56 points, or 0.8%, at 7,357, while European markets also rallied, with the German DAX 30 up 1.2% and the French CAC 40 rising 0.8%.

The dollar rose, with the pound falling 0.3% to $1.343 and the euro down 0.3% at $1.185, while the US Dow Jones index is expected to open around 200 points higher.

The US Senate passed the tax reform bill by 51 votes to 49. The bill differs to the one passed by the US House of Representatives last month, meaning the final rules will be subject to revisions.

'But it feels like the prospect of some form of tax reform appears likely - potentially by year end,' said Jim Reid at Deutsche Bank.

Investors have been buoyed by the prospect of the headline rate of US corporation tax being slashed from 35% to 20%.

It has sparked the revival of the 'Trump trade', a market bullishness spurred by hopes the US president's pro-growth agenda can drive US and global economic growth.

Markets had surged following Trump's election in November, but the rally had lost some impetus in recent months, as optimism the president could deliver on his tax-cutting agenda had waned, particularly following his failure to deliver healthcare reforms.

News of the passing of the vote also helped to lift markets from lows sparked by news on Friday that Trump's former top aide Michael Flynn had pleaded guilty to lying to the Federal Bureau of Investigation.

Investors were then rocked by an ABC report that Flynn was prepared to testify that Trump had directed him to make contact with Russian officials when a candidate for the presidency.

But the US news network has now suspended its chief investigative reporter Brian Ross, who reported the story, after he clarified the orders came when Trump was president-elect.

'European markets are playing catch-up after closing at the depths of the Friday market meltdown on Michael Flynn concerns and embracing the weekend's senate tax bill success,' said Rebecca O'Keeffe, head of investment at Interactive Investor.

'The pro-business tax cuts look set to boost US economic growth and have provided further impetus for US and global valuations.'

On the FTSE 100, tool hire company Ashtead (AHT), which does the majority of its business in the US, jumped 3.3% to £19.67. 

Banks were also buoyed, with Barclays (BARC) up 2.9% at 194.9p.

Among 'small-cap' stocks, US-focused investment trusts were among the risers. BlackRock North American Income (BRNA ) was up 3.2% at 163.5p while North American Income Trust (NAIT ) rose 3.1% to £13.00.

4 comments so far. Why not have your say?

SDRL

Dec 04, 2017 at 15:41

Donald Trump is doing a great job. The press is really giving the President very poor reporting for such a splendid job. Theresa May should be praising President Trump and not criticizing him. May infact is weak and blunders a lot like her call for a vote of confidence fiasco.

report this

Jim S

Dec 04, 2017 at 18:24

He's done a great job in promoting Britain First. I'm sure everyone in the UK will appreciate how much that will make us all feel safer by reducing domestic terrorism (except against MPs, 'foreigners' and non-Christian places of worship I guess)

I'm trying to think of what else he has achieved, maybe you could help me out? I think his grasp of detail about people who think he's a moron is fantastic, must be so hard to keep track.

report this

Alan Tonks

Dec 04, 2017 at 18:40

“Pound jumps after European parliament member says he is 'astonished' at Brexit progress.”

Why, May hasn’t negotiated she has capitulated at every turn, she should be Cantonese because all she ever does is Kowtow to the EU.

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SDRL

Dec 04, 2017 at 18:54

"I'm trying to think of what else he has achieved, maybe you could help me out?"

Jim,

Reforming tax legislation usually takes many years and President trump is getting it done in months. He has eliminated a lot of wasteful regulations that will

help business. He has improved public safety by improving immigration with strenuous limits in not letting in people who have strong anti American and criminal proclivities.

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