Asian markets extended gains yesterday while the euro held up following Emmanuel Macron’s first-round presidential election victory in France, with investors now looking forward to Donald Trump’s promised tax reforms.
Global markets soared on Monday after Macron topped the initial polls and looked well on course to beat far-right candidate Marine Le Pen in a run-off next month.
There had been fears a win for the anti-European, anti-immigrant Le Pen could see France pull out of the euro and even the EU and precipitate its possible collapse.
US and European markets tracked an Asian advance Monday.
Yesterday the gains continued, with Tokyo and Seoul each jumping more than 1% and Hong Kong up 1%. Shanghai, which has suffered a series of losses in the past two weeks on concerns about a government crackdown in leveraged investing, ended up 0.2%.
Taipei and Manila also posted strong gains. Sydney and Wellington were closed for a public holiday.
On currency markets the euro, which briefly broke $1.09 on Monday for the first time in almost a month, was hovering around $1.0870, while it also held at ¥119.80, well up from levels around ¥117 before France’s vote.
“With the market pricing in an amiable scenario for risk assets in the second round (of the French election), investors should continue to feed off this,” said Stephen Innes, senior trader at OANDA.
Now attention moves to the United States where Trump is due to unveil his much-vaunted tax overhaul Wednesday, which will call for cuts to personal and corporate rates, Bloomberg News quoted a White House official as saying.
Trump’s pledge to slash taxes and boost infrastructure spending were key drivers of a global market rally after his November election, though the past few weeks have seen a retreat as he failed to pass healthcare legislation, throwing his agenda into doubt.
However, there was a sense of trepidation as North Korea celebrates the 85th anniversary of its army, with fears Kim Jong-un could press on with his recent sabre-rattling with the US by conducting another nuclear or missile test.
Seoul’s defence ministry said Pyongyang was conducting a “massive fire drill” in the eastern port city of Wonsan but there had been no other movements.
Growing tensions between Pyongyang and Washington have fanned fears of a possible conflict in East Asia.
Another source of concern among traders is the threat of another costly US government shutdown as Trump heads for a face-off with Democrats over funding for his controversial Mexican border wall.
Building the wall was a key election promise and he is determined to get Congress to approve a downpayment as part of a bigger bill to keep the US government funded. The two sides have until Saturday to pass the bill or face the first shutdown since a 16-day closure in 2013 that cost the government billions of dollars.
“The uplift in risk appetite had been the result of a single event (French election), but this week carries with itself a multitude of factors to look out for,” said Jingyi Pan, a market strategist in Singapore at IG Asia.
“The second half of the week certainly brings President Donald Trump back to the stage as he presents both opportunities, in the form of his tax package, and risk, should his push for the border wall drive the US government to a shutdown.”
In Tokyo, the Nikkei 225 closed up 1.1% at 19,079.33 points; Hong Kong — Hang Seng rose 0.8% at 24,337.72 points and Shanghai — Composite edged up 0.2% at 3,134.57 points yesterday.
Pedestrians walk past an electronic stock prices board in Tokyo. The Nikkei 225 closed up 1.1% to 19,079.33 points yesterday.
