After two solid days, European stock markets are taking a little breather.
The UK, French and German indices have all dipped in early trading:
The prospect of sweeping tax reforms in America has helped to drive Asian stock markets higher today.
Japan’s Nikkei has closed 1% higher, and the other main indices are also gaining ground.
The agenda: Optimism keeps rippling through markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s a buoyant mood in the markets today, keeping indices at their highest ever levels.
Yesterday the MSCI World Index hit a record high, helped by optimism over European politics and hopes of chunky tax cuts in America.
That sent Wall Street racing last night, with the Nasdaq hitting 6,000 points for the first time ever. And traders expect to hold onto these gains today:
IGSquawk
(@IGSquawk)Our European opening calls:$FTSE 7284 +0.11%
$DAX 12482 +0.12%
$CAC 5286 +0.16%$IBEX 10793 +0.09%$MIB 20808 +0.01%
Three factors are working together to keep shares up, and thwart those who think the rally has gone two far.
1) The Europe effect. Investors seem pretty convinced that Emmanuel Macron will defeat Marine Le Pen on May 7th, and become France’s next president. Cautious voices point out that Macron faces a serious struggle to get his reform agenda moving – especially if his En Marche! party don’t make big wins in June’s elections.
2) Donald Trump’s tax reforms. The US president is expected to outline fiscal plans today, including slashing corporation tax from 35% to just 15%. That’s alarmed some experts, with one estimating that it could cost $2 trillion in revenue. But lower taxes = higher profits = higher share prices.
There’s also optimism that a budget deal can be reached to prevent a government shutdown, with Trump apparently giving ground over his Mexican Wall plan:
3) Decent corporate earnings. Yesterday, fast food chain McDonald’s and equipment maker Caterpillar both beat forecasts, bolstering hopes that the global economy is on firmer footings.
Mike van Dulken of Accendo Markets explains:
US equity markets continues their sharp jump higher in anticipation of the Trump administration’s tax reform announcement, with the tech-focused Nasdaq trading above 6,000 for the very first time, while both the S&P500 and Dow Jones indices move closer to their respective all-time highs.
Strong Q1 earnings performances from Caterpillar, McDonald’s and DuPont led the Dow over 200 points higher, while the Materials sector led the S&P to within 20 points of a fresh high.
Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney, agrees that “Confidence has returned”, adding:
Markets seem a lot more relaxed. Globally, we’re seeing a lot of risk-on.”
There’s not much in the economic diary today.
On the corporate front, the London Stock Exchange, Jupiter Fund Management, Metro Bank, chemicals firm Croda and German carmaker Daimler are reporting results this morning.
We’ll be tracking all the main events through the day….
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