Traders are brimming with confidence on the latest tax reform progress

  • Progress is being made in Washington on Republican tax reform
  • Investors are being emboldened and are responding by buying risk assets

Traders worldwide piled into riskier assets on Friday after the Senate passed its fiscal year 2018 budget resolution on Thursday, helping pave the way for Republican tax reform.

Futures on the S&P 500 index of US stocks climbed 0.2%, while the dollar climbed versus all but two of its 16 major counterparts. That included a 0.6% gain against the Japanese yen and a 0.3% increase relative to the euro.

News of tax reform progress is providing some relief for the stock market in particular, which grappled with weakness on Thursday before finishing slightly higher on the day. Corporate tax cuts are expected to boost profits for domestic corporations, while a one-time repatriation tax holiday is forecast to help companies with more international exposure.

Stocks also increased on a global basis, with the Euro Stoxx 600 and Germany’s DAX up 0.3%, while the Hong Kong-based Hang Seng index surged 1.2%.

Meanwhile, US Treasuries sold off, sending the 10-year yield up as much as 5 basis points to 2.37%, its highest in about three months. Risk optimism also spurred selling in gold — traditionally viewed as a safe haven asset.

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