EUROPE MARKETS: European Stocks Rally On U.S. Tax-reform Optimism With Banks In Charge
By Sara Sjolin, MarketWatch
Thales and Gemalto jump after takeover deal
European stocks rose for the first time in four session on Monday, with banks leading the charge north on hopes the highly anticipated tax reform in the U.S. will get passed this week and provide a boon for the financial sector.
What are markets doing: The Stoxx Europe 600 index rallied 1.2% to close at 392.66, marking its highest close since Nov. 8, according to FactSet data.
Among regional benchmarks, Germany's DAX 30 index jumped 1.6% to 13,312.30, while France's CAC 40 index put on 1.3% to 5,420.58.
The U.K.'s FTSE 100 index climbed 0.6% to 7,537.01 (http://www.marketwatch.com/story/ftse-100-advances-after-revival-of-us-tax-hopes-2017-12-18).
The euro rose to $1.1805 from $1.1748 late Friday in New York. The pound fetched $1.3395, up from $1.3322 on Friday.
What's driving the market: Fears that the Republicans would struggle to pass their major tax reform bill eased on Friday after 11th hour concessions made to the final version managed to appease the holdouts. Sens. Bob Corker of Tennessee and Marco Rubio of Florida both pledged their support for the bill, sparking optimism the final vote could come before Christmas.
Speaking on several Sunday talk shows, Treasury Secretary Steven Mnuchin said he has "no doubt" (http://www.marketwatch.com/story/mnuchin-says-no-doubt-congress-will-pass-tax-bill-this-week-2017-12-17) that the GOP's tax bill will make it to the desk of President Donald Trump this week.
Expectations of tax cuts in the U.S. have been a major factor behind the stock market rally stateside, with the optimism spilling over to the European market as well. Particularly banks are likely to get a windfall from the reform, potentially benefiting Europe's large international financial institutions with substantial business in the U.S. The Stoxx Europe 600 Banks Index ended up 0.1% on Monday.
U.S. also rallied on Monday (http://www.marketwatch.com/story/dow-sp-500-ready-to-power-to-new-records-on-fresh-tax-plan-optimism-2017-12-18), with the Dow Jones Industrial Average within touching distance of the 25,000 milestone.
What are strategists saying: "Investor optimism that Trump will score his first legislative victory since becoming President lifted stocks," said Jasper Lawler, head of research at London Capital Group, in a note.
"Up until Friday's publication, the extent to which individual U.S. firms would benefit from the tax reform bill was unclear. With the details now released, clear winners from the tax code will be U.S. firms which have high tax rates and mainly U.S. based revenues. So, the likes of banks, airlines and oil refineries are expected to be big beneficiaries," he added.
Stock movers: Shares of Thales SA (HO.FR) jumped 8.2% and Gemalto NV (GTO.AE) added 5.6% after news Thales will buy the Dutch security company for EUR4.8 billion ($5.66 billion) (http://www.marketwatch.com/story/thales-to-buy-chip-maker-gemalto-for-56-billion-2017-12-18).
Buwog AG (BWO.VI) soared 17% after Germany's Vonovia SE (VNA.XE) made a cash offer to acquire the Austrian property company in a EUR5.2 billion euro deal (http://www.marketwatch.com/story/vonovia-offers-to-buy-buwog-in-61-billion-deal-2017-12-18).
Green energy companies rose after the Republican tax bill released late Friday preserved tax credits for the wind and solar energy. Shares of Vestas Wind Systems AS (VWS.KO) gained 4.2% and Siemens Gamesa Renewable Energy SA (SGRE.MC) advanced 1.9%.
EasyJet PLC (EZJ.LN) lost 2.8% after the discount airline said it has snapped up part of Air Berlin PLC's (http://www.marketwatch.com/story/easyjet-buys-part-of-air-berlin-operations-2017-12-18)(AB1.XE) operations at Berlin Tegel airport. Air Berlin shares ended up 25%.
Shares of IG Group Holdings PLC (IGG.LN) tumbled 9.3% after flagging concerns over the European Securities and Markets Authority's tighter-than-expected clampdown on the sector.
Economic news: Eurozone inflation for November was confirmed at 1.5%, in line with the flash estimate.
(END) Dow Jones Newswires
December 18, 2017 12:23 ET (17:23 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.