Asian shares up on US tax, earnings hopes; Mueller report hits dollar

TOKYO (Reuters): Asian shares rose firmly on Friday as strong US earnings and a step forward in Congress on US tax reform brightened the mood, even though investors noted that many hurdles remain to passage of a deal on tax cuts.

But the dollar fell after the Wall Street Journal reported Special Counsel Robert Mueller’s team last month subpoenaed President Donald Trump’s campaign for documents containing specified Russian keywords from more than a dozen officials.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% while Japan’s Nikkei gained 0.4%, extending its recovery from a near three-week intraday low hit on Thursday.

Wall Street’s main indexes rose sharply on Thursday, boosted by strong gains in Wal-Mart and Cisco following their earnings.

The S&P 500 advanced 0.82% to turn positive for the week, a day after hitting a three-week low, while the Nasdaq Composite added 1.3% to a closing record high of 6,793.29.

MSCI’s broadest gauge of the world’s stock markets stemmed its five-day losing streak and posted its biggest daily gain in two months, of 0.80%, on Thursday.

Junk bond prices rebounded sharply, with iShares High Yield Bond ETF (HYG) gaining almost one% to recoup more than half of its losses since the start of the month.

“The markets had been wary of fall in credit products during the last few days but it seems we just had a healthy correction. As the European Central Bank and the Bank of Japan are still pumping liquidity, the world’s asset markets will be supported,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The US House of Representatives approved a broad package of tax cuts sought by Trump, passing its first, if smallest, hurdle and providing a catalyst for fresh buying in risk assets.

The tax debate now moves to the US Senate, where that chamber’s separate plan has already encountered resistance from some Republicans. No decisive Senate action is expected until after next week’s Thanksgiving holiday on Nov. 23.

The positive mood on Wall Street helped to lift the yield on two-year US notes US2YT=RR to a nine-year high, with a Fed rate hike in December seen almost as a done deal. Fed funds rates futures are now pricing in about a 90% chance of another rate hike by June next year, the highest level in recent months and up from about 50% just over a month ago. The US dollar, however, lost momentum and fell broadly following the media report Mueller issued a subpoena to more than a dozen officials in the Trump administration.

The dollar fell 0.5% to 112.46 yen JPY=, hitting its lowest level in almost a month. The euro EUR= gained 0.4% to $1.1815, edging back towards its one-month peak of $1.1862 touched on Wednesday.

Among Asian currencies, countries with current account surpluses saw their currencies gains.

The Korean won KRW= rose to its highest level in over a year, gaining 2.4% this week while the Thai baht THB= hit a two-year high and the Malaysia ringgit MYR= a one-year high, rising 0.8% and 0.7% respectively for the week.

Bitcoin BTC=BTSP hit a record high of $7,997, quickly recovering from its 30% plunge last week.

Oil prices have slipped from two-year highs hit last week on signs that US supply is rising and could potentially undermine OPEC’s efforts to tighten the market.

US light crude CLc1 stood at $55.34 a barrel, up 0.4% on the day but still within its trading range in the past couple of days and down 2.5% on the week.

Brent futures LCOc1 hit a two-week low of $61.08 a barrel and last stood at $61.24, down 0.2% on the day.