Asian shares rise on U.S. tax cut hopes; China in focus

SYDNEY– 18 December 2017: Asian shares edged up on Monday, with sentiment boosted by expectations U.S. lawmakers will pass a long-awaited tax bill this week, while Chinese stocks were soggy on concerns about liquidity and tighter regulations in the world’s second largest economy.

Meanwhile, the launch of bitcoin futures on the CME exchange bolstered expectations the cryptocurrency’s red-hot rally in the cash market could continue, although their trading debut was tepid.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.4 percent. Japan's Nikkei .N225 was the best performer in the region, rising 1.6 percent to edge closer to a 25-year peak of 23,382 points set last month.

European and U.S. stocks are also expected to have a solid start to the week. The near-month FTSE futures contract FFIc1 and the e-mini S&P futures ESc1 were each up 0.2 percent. Dow futures 1YMc1 rose 0.4 percent.

Global stock markets have surged this year, largely led by expectations of a U.S. tax overhaul. The reform is seen boosting corporate profits, triggering share buybacks and higher dividend payouts - a boon for shareholders.

Votes on the legislation are expected this week.

But the mood was dour in Asia’s biggest economy where the People’s Bank of China increased rates on reverse repurchase agreements, or reverse repos, triggering concerns about tight year-end liquidity.

Chinese shares eased, with Shanghai's SSE Composite index down 0.2 percent after opening higher. The bluechip CSI 300 .CSI300 also came off the day's high to be largely unchanged.

China will be in focus this week as investors look for news from a three day Central Economic Work conference starting Monday where Communist Party leaders will discuss economic policy, including growth targets.

“While there are no obvious signs yet, we do expect a modest slowdown in Chinese growth in coming months,” said Steve Waddington, portfolio manager at Insight Investment, which has A$930 billion ($712 billion) in assets under management.

China could lower its growth target to 6.0 percent from 6.5 percent, Waddington added, amid tighter financial conditions and stricter regulation aimed at reducing leverage.

CURRENCIES

Bitcoin futures received a lukewarm reception on its first day of trading on the CME exchange <0#BTC:>, with the near-month contract down 0.3 percent on thin volumes.

In the cash market, bitcoin was last down 0.5 percent at $18,851 after hitting a record $19,666 on Sunday on the Luxembourg-based Bitstamp Exchange. BTC=BTSP

“The introduction (of futures contracts) has added validity, acknowledging bitcoin as a legitimate asset,” said Shane Chanel, a fund manager at ASR Wealth Advisers.

“The launch should increase buy-side pressure and potentially be the catalyst that pushes bitcoin above $20,000.”

In currencies, the U.S. dollar stayed above a 1-1/2 week trough against the Japanese yen, after slipping 0.8 percent last week. JPY=

Trading was generally thin as investors wound up their books ahead of Christmas holidays.

The British pound GBP= inched up but was still near 3-week lows as Prime Minister Theresa May prepared for a week of difficult meetings in an effort to unite a divided cabinet over Brexit talks.

In commodities, oil prices were slightly firmer with U.S. crude CLc1 up 30 cents at $57.60 while Brent crude LCOc1 rose 28 cents to $63.50.