European shares up as US announces corporate tax cut

LONDON: Europe's stock markets posted small gains Wednesday after they got, and liked, a first taste of US President Donald Trump's fiscal reform plan in the form of a deep cut in corporate taxes.

The dollar clawed back ground against the euro, which came off an earlier five-month high against the greenback, after Treasury Secretary Steven Mnuchin said Trump will propose slashing the corporate tax rate to 15 percent, from a top rate of 35.

Wall Street was also cautiously higher following the announcement, but investors were awaiting further details on Trump's much-vaunted tax plan due later Wednesday.

"Any investor hesitation is due to uncertainties surrounding Donald Trump's tax reform announcement," analysts at Mirabaud Securities Geneve said.

Analysts said they needed to know how deep cuts in corporate, and probably individual, tax rates will be paid for before buying in.

"With the plan expected to increase the Federal budget deficit by $7 trillion over the next decade," said Paul Ashworth at Capital Economics, "there is no chance of it getting approved by Congress".

Financial markets were electrified earlier in the week by news that centrist Emmanuel Macron had triumphed over far-right candidate Marine Le Pen in the first round of France's presidential election.

The positive sentiment was also boosted by a slight easing of tensions over North Korea and hopes a feared shutdown of the US government can be averted, after Trump appeared to soften his stance on congressional funding for his Mexican border wall.

- Europe out of steam -

However, in Europe, equities appeared to be out of steam on the eve of an interest rate call from the European Central Bank.

"The bounce in equity markets appears to have exhausted itself for now, at least in Europe," noted Chris Beauchamp, analyst at IG trading group.

In foreign exchange activity, the euro jumped to $1.0951 in morning London deals -- striking the highest level since early November 2016, before slipping back to below $1.09.

But the unit was still supported by French election optimism, and reports that the ECB could start to wind down its monetary easing programme as eurozone economies continue to improve.

But most analyst believe the ECB will stick to the script Thursday, and fend off calls to wind down its massive monetary stimulus, at least until the political waters in Europe calm down.

In Asia earlier, Tokyo's Nikkei ended up 1.1 percent, while Hong Kong was 0.5 percent higher, its fifth straight day of gains.