Stock Market News (US Open) – European equities pushed higher by financials; Wall Street rises in anticipation of tax plan

Carol, XM Investment Research Desk

Renewed hopes of fiscal stimulus in the US in the form of tax cuts boosted sentiment in Europe today, allowing banking stocks to rally. European equities were broadly in the green as the pan-European Stoxx 600 hit a fresh 10-week high of 385.82. The index was 0.5% up on the day during late European trading hours, trading near the day’s high.

The FTSE 100, DAX and CAC 40 were up by 0.5%, 0.6% and 0.3% respectively. Adding to morning gains, the Spanish IBEX 35 performed the best among major blue-chip benchmarks in the continent. It was last up by an impressive 1.9%. The index underperformed earlier in the week on tensions over Catalonia’s independence referendum which was declared as illegal by the Spanish government.

Financials were performing strongly today, rendering themselves the biggest gainer within the Stoxx 600. Stoxx 600 Banks was last up by 2.4% with Spanish banks Banco de Sabadell (up 7.1%) and Caixabank (up 4.7%) leading the sub-index’s gains.

Alstom (up 5.6%) only lagged Bank Banco de Sabadell in the list of Stoxx 600 top outperformers. Alstom and Siemens (up 1.6%) agreed to merge their rail operations, bringing to life a European rail giant provided that regulatory and shareholder approvals go through as planned. Alstom touched 36.50 euros at its highest, a level not experienced since early August 2011.

ICA Gruppen (down 5.0%) was the Stoxx 600’s worst performing stock. The Swedish retailer was cut to “sell” by broker SEB. Home appliance manufacturer Electrolux, another Swedish-based firm, was a notable decliner as well, being last down by 3.4%. It was downgraded to “neutral” from “buy” by Goldman Sachs.

Pearson (up 4.4%) posted hefty gains, being the biggest FTSE riser and one of the best performing stocks within the Stoxx 600. The publishing and education company received a double upgrade by Exane BNP Paribas – it was upgraded to “outperform” from “underperform” and saw its price target revised upwards. It should be mentioned though that Deutsche Bank cut the company to “sell” from “hold” and revised the firm’s target price downwards.

Financials led the gains in the FTSE as well, with Lloyds (up 2.85%), Royal Bank of Scotland (up 2.8%) and Standard Chartered (up 2.7%) all performing strongly.

Euro/dollar was last trading near the day’s low of 1.1715; the lowest level for the pair since August 18. Euro weakness on political uncertainty following Sunday’s German elections is seen as supporting Eurozone exporter-heavy benchmarks.

Closely-followed indices on Wall Street opened higher in anticipation of a new tax plan by the Trump administration. Just minutes after the opening bell the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 were trading higher by 0.3%, 0.4% and 0.7% respectively. The S&P was within close distance of its all-time high.

The Trump administration and Republicans in Congress will later unveil their tax plan. The US president is seeking bipartisan cooperation on this front, saying yesterday “It’s time for both parties to come together” and adding that lawmakers should expect a “very, very powerful document” delivering a big tax cut for middle-class Americans. Similar to Europe, financials will be in focus in the US.