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Global stocks dip on U.S. tax doubts

Reuters  |  LONDON 

By Kit Rees

(Reuters) - World stocks edged lower on Friday on signs that U.S. reforms could be delayed after Senate Republicans offered a plan that differed significantly from the House of Representatives' version.

MSCI's stock index, which tracks shares in 47 countries, declined 0.1 percent, slipping further from a record level.

On Thursday the index failed by one day to post its longest winning streak since 2003 as it fell 0.4 percent following 10 days straight of gains.

The pan-European STOXX 600 index was on track for its worst week in three months, however, down 0.2 percent on Friday and falling for a fourth day in row.

The MSCI world index has gained more than 18 percent so far this year and some investors believe a pullback is due.

"I think there's a feeling out there that there's a long awaited correction, and no one wants to be caught by surprise," Emmanuel Cau, equity strategist at JP Morgan, said.

"When the market is down a bit people tend to extrapolate. But I think it's simply a bit of profit taking and digesting from a very strong September and October."

On Wall Street, futures for the S&P 500 fell 0.4 percent, while Dow futures were down 0.2 percent, with the indexes set to extend Thursday's losses.

The hiatus over reforms weighed on the dollar. It gave up earlier gains to trade flat in percentage terms at 94.462 and was set for its biggest weekly drop in four weeks.

U.S. Republican senators said they wanted to slash the corporate rate in 2019, later than the House's proposed schedule of 2018, complicating a push for the biggest overhaul of U.S. law since the 1980s.

The House was set to vote on its measure next week. But the Senate's timetable was less clear.

"Things look fluid, including on when the cut deal will be reached," said Hirokazu Kabeya, chief strategist at Daiwa Securities.

"I would say a compromise will be reached ...But if they indeed decide to delay the cut by a year, there is likely to be some disappointment."

STOCKS OUTLOOK STILL BUOYANT

Strength in the economy is expected to continue offering broad support to stocks.

"Yesterday the European Commission revised up its economic growth forecast and cut its inflation forecast. And we can find the same story in the world as a whole. Growth is seen higher while inflation will remain tame," said Shuji Shirota, head of macro economic strategy group at HSBC.

"The goldilocks economy continues while interest rates remain low, creating favourable conditions for stocks."

The European Commission forecast the euro zone economy will grow at its fastest pace in a decade this year.

A economic expansion is seen buoying both U.S. and European company earnings this year, with both enjoying earnings growth in the third quarter.

In the currency market, the euro edged 0.1 percent higher to 1.1648, while sterling rose 0.2 percent to 1.3171.

The 10-year U.S. Treasuries yield rose to 2.3700 percent, while German government bond yields climbed to their highest level in over a week as euro zone bonds sold off across the board for a second consecutive day. [nL8N1NG2CR]

The yield on Germany's 10-year government bond, the benchmark for the bloc, hit 0.40 percent for the first time since Oct. 27.

Among commodities, oil prices steadied on expectations of supply cuts by major exporters as well as continuing concern about political developments in Saudi Arabia. [O/R]

A spokesman for Saudi Arabia's energy ministry said the kingdom planned to cut crude exports by 120,000 barrels per day in December from November.

Brent crude was at $63.99 per barrel, close to a two-year high of $64.65 reached earlier this week. U.S. light crude futures traded at $57.14, also just shy of this week's more than two-year high of $57.69. [O/R]

Concerns about the stability of Saudi Arabia, sparked after the purge of 11 princes and the arrest of dozens of other influential figures since last week, are intensifying.

Sources told that Lebanon believes the country's former prime minister, Saad al-Hariri, was being held in Saudi Arabia, although Saudi Arabia denied reports he was under house arrest.

Saudi Arabia accused Beirut earlier this week of declaring war against the kingdom.

(Reporting by Kit Rees, additional reporting by Helen Reid in and Hideuyki Sano in Tokyo; editing by John Stonestreet and Adrian Croft)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, November 10 2017. 18:58 IST
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