Asian Stocks Rally, Bonds Drop on Trump Tax Pledge

Asian stocks rallied while the yen and government bonds slumped after U.S. President Donald Trump promised a plan to overhaul business taxes in the next few weeks.

Equity markets from Japan to Malaysia advanced, sending the MSCI Asia Pacific Index back to the highest level since July 2015 after U.S. stocks climbed to records. The dollar headed for its first weekly gain of the year and Treasuries retreated for a second day as Trump’s pledge revitalized trades that had begun to show signs of cracking. Chinese shares climbed as a trade report indicated overseas shipments rebounded on stronger global demand. Gold slipped while crude extended a rally to a third day.

Equities surged to fresh highs after Trump said a “phenomenal” plan to overhaul business taxes may be released within the next “two or three weeks.” The comments served as a lifeline to so-called reflation trades that were weakening as the administration defended immigration orders and threatened to rewrite trade terms while providing scant details on pro-growth policies promised during the campaign.

Chinese data showed exports to the U.S. rose 9 percent from a year ago in dollar terms, which could exacerbate concerns by the Trump administration about bilateral trade. At the same time, Trump’s first phone call as president to counterpart Xi Jinping may help ease a key source of diplomatic tension between the world’s two largest economies, as he reaffirmed the U.S.’s long-standing support for the ‘One-China’ policy.

What’s coming up in the markets:

• Attention will turn Friday to Shinzo Abe’s visit with Trump, as investors parse reports Japan’s prime minister is prepared to offer infrastructure investment, with the U.S. administration still sitting on details of its own policy proposal.
• Trump appears set to go to the Supreme Court over his ban on immigration after a San Francisco-based appeals court upheld a suspension of the order.
• The International Energy Agency and OPEC monthly reports are due on Friday and Monday, respectively, providing the first full month of production data since the oil cartel’s supply deal.

Here are the main market moves:

Stocks

• The MSCI Asia Pacific Index jumped 0.9 percent at 3:34 p.m. in Tokyo. Japan’s Topix rose 2.2 percent, the most since Jan. 4, to bring it back above its average price for the past 50 days.
• Australia’s S&P/ASX 200 Index climbed 1 percent for a fourth-straight gain and the best weekly performance since early December. Benchmarks in Singapore and Taiwan climbed at least 0.7 percent. Malaysian shares rose to the highest level since April.
• Hong Kong’s Hang Seng added 0.6 percent, while the Hang Seng China Enterprises Index increased 1 percent, heading for a fifth straight gain to the highest since November 2015.
• Contracts on the S&P 500 increased 0.2 percent after the index rose 0.6 percent to a record 2,307.87 on Thursday. Airlines jumped 2.5 percent amid Trump’s promise to cut regulations on the industry.

Bonds

• Treasuries fell, with 10-year yields rising one basis point to 2.41 percent. Yields gained six basis points on Thursday, halting a rally that took yields to the lowest in three weeks on a closing basis.
• Australian bonds also fell, sending 10-year yields up five basis points to 2.70 percent. New Zealand yields rose four basis points to 3.20 percent.

Currencies

• The yen was down 0.4 percent to 113.71 per dollar after sliding 1.2 percent the previous session. The New Zealand dollar was little changed after a 1.1 percent drop on Thursday.
• The Bloomberg Dollar Spot Index rose 0.1 percent after Thursday’s 0.3 percent advance, and is poised to snap a six-week losing streak.
• The world’s largest foreign-exchange trading firm sees the dollar rising this year even as the president talks the greenback down and blasts some of the nation’s biggest trading partners for currency manipulation.

Commodities

• Oil rose 0.3 percent to $53.15 a barrel Friday after it rose 1.3 percent the previous session. Output cuts from OPEC and other producing nations are seen clearing a global inventory glut.
• Gold fell 0.4 percent to $1,223.73 an ounce, after dropping 1.1 percent on Thursday. The metal, which is considered a haven asset, was at a three-month high earlier in the week.