Asian shares, dollar gain after US Senate passes budget plan

Tokyo: Asian shares and the dollar gained on Friday after the US Senate approved a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue a tax-cut package without Democratic support. European stock futures STXEc1 rose 0.3 per cent, pointing to a firm start, while Dax futures FDXc1 rose 0.4 per cent and CAC 40 futures FCEc1 were up 0.3 per cent.

By a 51-to-49 vote, the Republican-controlled Senate voted for the budget measure late on Thursday, which would add up to $1.5 trillion to the federal deficit over the next decade in order to pay for proposed tax cuts.

“The US Senate has passed a budget resolution which paves the way for potential tax reforms in the US So that has seen the dollar strengthen and US yields move higher, as a result we’ve seen Asian currencies weaken,” said Khoon Goh, head of Asia Research at ANZ.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS, which scaled a 10-year peak on Tuesday, was up 0.3 per cent, but still down slightly for the week.

US S&P 500 e-mini futures SPc1 were up 0.3 per cent, and the benchmark 10-year Treasury yield rose to 2.353 per cent from its US close of 2.321 per cent on Thursday.

Shares in New Zealand notched their 14th straight rising session and fifth winning week to close at a record after the nationalist New Zealand First Party agreed to form a new government with the center-left Labour Party following weeks of political negotiations, ending the center-right National Party's decade in power.

But the New Zealand dollar wallowed at five month lows after a 1.7 per cent fall on Thursday, its largest daily fall since June 2016, on concerns the new Labour coalition will take a tougher stance on immigration and foreign investment than the outgoing center-right government.

Hong Kong's Hang Seng index was up 0.8 per cent, recovering some of Thursday's 1.9 per cent loss. On the mainland, the Shanghai Composite Index edged slightly higher, while the blue-chip CSI300 index was down 0.3 per cent.

Japan's Nikkei erased its earlier losses and eked out a 0.04 per cent gain, and a robust weekly rise of 1.4 per cent. The Nikkei logged its 14th gaining session, its longest such streak since 1961.

US stocks were almost flat on Thursday, with Apple Inc falling 2.4 per cent on signs of weak demand for the iPhone 8 that caused analysts and investors to question the company’s staggered release strategy for its latest phones.

The dollar buckled and US bond yields dipped on Thursday after a report that President Donald Trump was leaning toward Jerome Powell as the next chair of the Federal Reserve.

Powell is seen as the most dovish of the Republican candidates. The current chair, Janet Yellen, a Democrat who is seen as a policy dove, is also on Trump’s short list, though few investors expect Trump to nominate a Democrat to the job.

“Clarity about the Fed nomination would be positive for the dollar,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

The dollar index, which tracks the greenback against a basket of six major rivals, rose 0.2 percent to 93.494, up 0.4 for the week.

The dollar jumped 0.6 per cent to 113.16 yen on track to gain 1.2 per cent for the week, as investors awaited Sunday's Japanese general election.

Japanese Prime Minister Shinzo Abe’s ruling bloc is expected to secure a roughly two-thirds majority in Sunday’s general election.

“That kind of result would not have a big impact on the yen,” said Yamamoto, “but it is important to see whether or not the [ruling Liberal Democratic Party] considers it a victory for Abe or not, and it’s difficult to say where the threshold for that might be.”

The euro was 0.4 per cent lower at $1.1808, moving back toward this week's low of $1.1730 and down 0.1 per cent for the week.

In Europe, shares notched their largest drop in two months on concerns over political upheaval in Spain and after disappointing results from large companies such as Unilever, France’s Publicis and Germany’s Kion.

Spain’s central government said on Thursday it would suspend Catalonia’s autonomy and impose direct rule after the region’s leader threatened to go ahead with a formal declaration of independence if Madrid refused to hold talks.

Crude oil prices firmed after shedding more than 1 per cent on Thursday, breaking four days of gains, pressured by larger-than-expected product inventories in the United States and profit-taking after a recent run-up in markets.

Brent crude LCOc1 was up 17 cents at $57.40 a barrel, while US crude CLc1 added 22 cents to $51.51.