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Equities in Asia close higher on back of solid US earnings; dollar/yen gains, Trump tax plans eyed

Asian indexes traded higher on Wednesday, following the rise in U.S. indexes overnight on the back of strong earnings announcements and on expectations for U.S. President Donald Trump's impending tax reforms.

Pedestrians walk in front of a display flashing numbers of the Nikkei key index of the Tokyo Stock Exchange in Tokyo on April 25, 2017.
Kazuhiro Nogi | AFP | Getty Images
Pedestrians walk in front of a display flashing numbers of the Nikkei key index of the Tokyo Stock Exchange in Tokyo on April 25, 2017.

Stocks in Asia climbed higher across the board. Japan's benchmark Nikkei 225 index soared 1.1 percent or 210.1 points to close at 19,289.43, while the Kospi registered gains of 0.5 percent or 10.99 points to finish at 2,207.84. The ASX 200 rose 0.68 percent or 40.217 points to close at 5,912.

Markets in greater China were higher with the Hang Seng Index up by 0.58 percent, and the Shanghai Composite inched up by 0.2 percent or 6.2797 points to close at 3,140.8471, while the Shenzhen Composite rose 0.368 percent or 6.9292 points to finish at 1,889.7872.

In the U.S., stocks soared as McDonald's and Caterpillar reported solid earnings, with the Nasdaq surpassing the 6,000 mark for the first time. The Dow Jones industrial average surged 1.12 percent or 232.23 points to close at 20,996.12.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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"(T)oday's moves appear to more related to expectations for Trump's impending 'broad principals' tax plan ... It is widely tipped that ... the corporate tax rate (will) be cut to 15 percent from 35 percent. The key for markets will be how will such a tax cut be funded and what is the likelihood of the tax cut being passed by Congress." National Australia Bank economist Tapas Strickland said in a note.

While markets may go higher on the back of flashy tax headlines, ThinkMarkets Chief Market Analyst Naeem Aslam added that the risk of a looming government shutdown had not been priced in sufficiently. Trump had requested for additional spending for his border wall plans, but has appeared to ease demands.

Nevertheless, the dollar strengthened against the yen on the back of tax optimism, trading at 111.41 at 2:55 pm HK/SIN. "If Trump is light on details, the dollar could unwind its gains quickly but if he over delivers, dollar/yen will make a run for 112," BK Asset Management Managing Director Kathy Lien said.

The Canadian dollar continued to trade around its lowest levels against the dollar since last December due to trade concerns. The greenback last traded at C$1.3574 against the loonie. Meanwhile, Aussie/dollar weakened to trade at $0.7500, off the $0.756 handle seen on Monday.

The dollar index traded at 98.869, off 99 handle seen earlier this week, due to renewed euro strength on improved risk appetite. Euro/dollar fetched $1.0944 earlier in the session, surpassing the five-and-a-half month high of $1.0935 hit following Emmanuel Macron's victory at the first round of French polls.

In corporate news, Japan Post Holdings reported a $3.6 billion write-down on it's Australian logistics unit, Toll Holdings. Japan Post also estimated losses of 40 billion yen ($362.35 million) — its first annual loss in around ten years. Japan Post stocks closed 1.16 percent higher at 1,393 yen a stock.

Meanwhile, Toshiba said it would part ways with its auditor PricewaterhouseCoopers Aarata, according to the Nikkei. The auditor did not endorse Toshiba's Q3 earnings released earlier this month. The U.S. government could potentially provide support to Toshiba's U.S. nuclear arm Westinghouse, the Wall Street Journal said. Toshiba shares rose 2.27 percent to close at 220.9 yen a stock.

BHP Billiton cut its production targets for iron ore, coking coal and copper, highlighting poor weather in Australia and strikes at the Escondida mine in Chile. Shares of BHP Billiton gained 0.58 percent to end at A$24.08 a stock.

Gaming stocks in Hong Kong popped on Wednesday, with most major companies registering gains above 3 percent. This follows the Q1 earnings release of Wynn Resorts, Wynn Macau's parent company, which beat Street estimates. Wynn Macau Q1 net profits rose 26 percent on year. Shares of the Wynn Macau jumped 4.63 percent, SJM Holdings added 4.86 percent and Melco International Development gained 6.3 percent.

"We remain optimistic on Wynn Macau's outlook, driven by continuous ramp-up at Wynn Palace and our expectation of a significant improvement in its debt-to-EBITDA ratio," Citi equity analysts George Choi, Anil Daswani and Aras Poon wrote in a note.

Oil prices were lower following a report on the build in U.S. crude inventories. Brent crude futures traded 0.19 percent lower at $52 a barrel while U.S. crude futures were down 0.24 percent at $49.44.

On the economic calendar, Australia reported that Q1 consumer price inflation rose 2.1 percent on year even though key measure of core inflation remained below the Reserve Bank of Australia's 2 to 3 percent target.

Singapore industrial production numbers for March rose 10.2 percent on year due to strong performance from its electronics sector, more than the 7.1 percent Reuters forecast. The Bank of Japan also embarks on a two-day meeting beginning today.