Dow ends at fresh record as pound falls after rate hike

John Biers, Agence France-Presse

Posted at Nov 03 2017 08:12 AM

NEW YORK - The Dow finished at a fresh record Thursday after President Donald Trump nominated Jerome Powell to lead the Federal Reserve and congressional Republicans unveiled their long-awaited tax cut plan.

The moves in the US came on a mixed day for equity markets elsewhere, with London rallying after the Bank of England raised interest rates for the first time in a decade.

Analysts viewed Trump's Fed pick as a non-controversial choice unlikely to radically change the gradual tightening monetary policies that stock markets like.

"Meet the new boss, mostly the same as the old boss," said a note from Barclays.

Powell has echoed the Trump administration's views on bank deregulation, but also supported outgoing Fed chief Janet Yellen's very gradual interest rate increases.

Meanwhile, the tax reform proposal, which would dramatically slash corporate rates, was touted by Trump and allies in Congress as crucial to speed economic growth. 

But powerful groups representing small businesses and homebuilders came out against the plan, underscoring the challenges ahead.

"There is still a long way to go for the tax reform," said Hugh Johnson of Hugh Johnson Advisors. "There will probably be a significant amount of changes."

"The market is aware of that, but is happy that something at least is getting done in Congress."

The moves come as US investor sentiment remains strong following a run of improving economic data and earnings. Apple jumped 3.2 percent Thursday in after-hours trading following its earnings report.

Analysts were also looking ahead to Friday's US jobs report for October.

'DOVISH' RATE HIKE

Equity markets in Paris and Frankfurt finished modestly lower, but London jumped 0.9 percent after the Bank of England announcement, with investors betting the decision by the Bank's monetary policy committee to hike benchmark rates will not be repeated anytime soon. 

"A dovish rate hike from the Bank of England on Thursday has triggered a sell-off in the pound while yields on UK debt have also fallen," said Craig Erlam at OANDA.

"The impression that the MPC has given is this is a 'one and done' rate hike," Erlam said.

And Marianna Sofocleous at FXTM, said while normally, "such an auspicious event would have immediately elevated sterling and boosted sentiment towards the UK economy, however, we are seeing a completely opposite reaction."

"With the central bank cautioning that future rate increases will be 'at a gradual pace' and to 'a limited extent', this is clearly a dovish hike which has raised questions over the future path of interest rates beyond November," she said.

But there were dissident opinions, with analyst John Higgins at Capital Economics suggesting further hikes may turn out to be less gradual and limited than many believe.

"We continue to think that the markets are underestimating how quickly rates will rise in the UK," he said. "We think that UK monetary policy will provide some renewed support to sterling before long."

KEY FIGURES AROUND 1640 GMT (12:40 a.m. in Manila)

New York - DOW: UP 0.3 percent at 23,516.26 (close)

New York - S&P 500: UP less than 0.1 percent at 2,579.85 (close)

New York - Nasdaq: DOWN less than 0.1 percent at 6,714.94 (close)

London - FTSE 100: UP 0.9 percent at 7,555.32 points (close) 

Frankfurt - DAX 30: DOWN 0.2 percent at 13,440.93 (close) 

Paris - CAC 40: DOWN 0.1 percent at 5,510.50 (close)

EURO STOXX 50: DOWN 0.2 percent at 3,688.80

Tokyo - Nikkei 225: UP 0.5 percent at 22,539.12 (close)

Hong Kong - Hang Seng: DOWN 0.3 percent at 28,518.64 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,383.31 (close)

Euro/dollar: UP at $1.1660 from $1.1625 at 2100 GMT

Pound/dollar: DOWN at $1.3063 from $1.3252

Dollar/yen: UP at 114.09 yen from 114.07 yen

Oil - Brent North Sea: UP 13 cents at $60.62 per barrel

Oil - West Texas Intermediate: UP 24 cents at $54.54 per barrel 

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