Market Update & Important Indicators
Declining shares of technology companies caused major indexes to wobble Tuesday, even as Republicans advanced their sweeping rewrite of the U.S. tax code. After two consecutive sessions of gains for all three major indexes, investors paused Tuesday as House Republicans voted to approve the latest version of the overhaul as expected. The bill has already sent shares higher in recent sessions, building on the momentum stocks have enjoyed from another strong quarter of earnings and an expanding U.S. economy. The Dow Jones Industrial Average shed less than 0.1%, while the S&P 500 fell 0.2%. The tech-heavy Nasdaq Composite dropped 0.5%. Declines among shares of tech companies weighed on indexes. While analysts say the tax bill is expected to boost profits among companies that pay relatively high effective tax rates, such as retailers, banks and other firms, tech companies aren't expected to benefit as much, analysts say, since they tend to pay a lower tax bill than companies in other sectors. Tech companies in the S&P 500 pay an effective tax rate of about 18%, according to data from FactSet. The U.S. gold price traded flat overnight, closing at 1,261.30 US$/oz.
European stocks closed lower on Tuesday as traders weighed up rising optimism that U.S. tax cuts will win passage this week against a disappointing reading on German business sentiment. The Stoxx Europe 600 index dropped 0.4% to close at 391.02, after scoring its highest close since Nov. 8 on Monday. Germany's DAX 30 index fell 0.7% to 13,215.79 on Tuesday, while France's CAC 40 index gave up 0.7% to 5,382.91. The U.K.'s FTSE 100 index added 0.1% to 7,554.09.
Most Asia-Pacific indexes closed higher Tuesday amid the increasing likelihood of an overhaul of the U.S. tax code. In China, both the Shanghai Composite and the Shenzhen Composite rose 0.9%. Hong Kong's Hang Seng Index returned to positive territory for December, rising 0.7%, with tech heavyweight Tencent Holdings up 1.8%. Japan’s Nikkei fell 0.2%, while Taiwan's Taiex closed 0.4% lower, dragged down by Apple Inc.
Australia's stock benchmark hit 10-year highs today, with commodity stocks continuing to lift the underperforming market. Lagging the 2017 gains seen elsewhere, the S&P/ASX 200 rose 0.5% to 6071.8, adding to December's advance. BHP Billiton and Rio Tinto rose some 1% while energy firms like Woodside and Oil Search climbed even higher despite a lack of fresh gains in crude prices to start this week. Now up 7.2% for the year, the ASX is on pace for its biggest gain since 2013.
The London Metal Exchange’s 3-month copper contract traded higher overnight, gaining 0.5% to finish at $6,942/t. The other base metals also finished mostly higher. Aluminium prices added 1.2% to close at 2,081/t, whilst Lead prices pulled back 1.0% to close at 2,559/t. Tin prices rose 0.1% to close at 19,390/t, whilst Nickel prices fell 0.7% to 11,698/t. Zinc prices added 0.1% to close at 3,192/t.
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