Asia markets enjoy pre-Christmas cheer, euro avoids sell-off

HONG KONG — Most Asian markets on Friday saw in the Christmas break on a positive note, picking up the baton from Wall Street while the euro stood firm against a sell-off despite a victory for Catalan separatists in a snap poll.

Global equities rallied over the past year on hopes Donald Trump's key election promise to cut taxes would boost corporate profits and put money in people's pockets, but traders cashed in their profits soon after the bill was passed this week.

However, buying perked up again on Thursday on bets that the tax reform would further fire the already healthy US economy, while there was also cheer for news that lawmakers had agreed a deal to avert a painful government shutdown.

"A day after being non-plussed with the passage of the US tax bill through the House and Senate, it seems stock traders decided that yes, after all, they do think the tax cuts will help valuations and the economy," said Greg McKenna, chief market strategist at AxiTrader.

The US gains extended into Asia with Hong Kong up 0.7 per cent, Sydney adding 0.2 per cent and Singapore putting on 0.3 per cent. 

Tokyo's Nikkei closed 0.2 per cent higher, while Seoul, Wellington, Taipei and Jakarta were also stronger.

But Shanghai dipped 0.1 per cent.

"The US corporate tax cut will lead to better earnings results and have a positive impact on the economy," Hideyuki Ishiguro, a senior strategist at Daiwa Securities in Tokyo, told Bloomberg News.

‘Reality check’

However, Stephen Innes, head of Asia-Pacific trading at OANDA, warned of possible headwinds for 2018, pointing out that Trump could struggle to push through a planned $1 trillion infrastructure bill in the face of low poll ratings and possible mid-term election losses. 

On currency markets, the euro edged down but held its own after Catalan separatists won the crucial election on Thursday, fuelling fresh uncertainty in Spain, one of the eurozone's biggest economies.

The vote came after a failed independence bid earlier this year rattled Europe and triggered Spain's worst political crisis in decades.

While pointing out there had been little immediate negative impact on the single currency, Innes said the result "would deal a significant blow (to) Spanish Prime Minister Mariano Rajoy that could potentially escalate".

Bitcoin sank 20 per cent to briefly sit just above $13,000 for the first time since December 7, hit by profit-taking.

The volatile cryptocurrency kicked the week off with a bang, hitting $19,500 as it extended its astonishing rise but it has suffered a significant correction this week, losing a third of its value since its Monday high.

Investors are having a "reality check", Innes said. "At the heart of the matter was a frenzied demand for coins with limited supply has now led to unsophisticated investors holding the bag at the top."

At its height, Bitcoin had soared almost 30-fold since the start of the year and has moved into the mainstream as two major US exchanges began trading futures in the unit.

In early European trade London and Paris each lost 0.2 per cent and Frankfurt was 0.3 per cent off.