Apple could drop Qualcomm components in next year’s iPhones, iPads: sources

(Reuters) – Apple Inc (AAPL.O) has designed iPhones and iPads that would drop chips supplied by Qualcomm Inc (QCOM.O), according to two people familiar with the matter.

FILE PHOTO: A man is reflected in a Apple store logo in San Francisco, California, U.S., August 21, 2017. REUTERS/Kevin Coombs/File Photo

The change would affect iPhones released in the fall of 2018, but Apple could still change course before then, these people said. They declined to be identified because they were not authorized to discuss the matter with the media.

The dispute stems from a change in supply arrangements under which Qualcomm has stopped providing some software for Apple to test its chips in its iPhone designs, one of the people told Reuters.

The two companies are locked in a multinational legal dispute over the Qualcomm’s licensing terms to Apple.

Qualcomm told Reuters it is providing fully tested chips to Apple for iPhones. “We are committed to supporting Apple’s new devices consistent with our support of all others in the industry,” Qualcomm said in a statement.

FILE PHOTO: One of many Qualcomm buildings is shown in San Diego, California, U.S. on November 3, 2015. REUTERS/Mike Blake/File Photo

The Wall Street Journal first reported that Apple could drop Qualcomm chips Monday.

Bernstein analyst Stacy Rasgon said Apple’s move is not totally unexpected.

Though Qualcomm has for several years supplied Apple’s modems – which help Apple’s phones connect to wireless data networks – Intel Corp (INTC.O) has provided upward of half of Apple’s modem chips for iPhones in recent years, Rasgon said. Intel recently acquired a firm that would let it replace more of Qualcomm’s chips in iPhones, Rasgon said.

Rasgon said it’s too early to say definitively whether Apple fully intends to drop Qualcomm next year because Apple can likely make multiple contingency plans for different supplier scenarios.

“Apple is big enough that they want to support multiple paths, they can do that,” Rasgon said. “Samsung (Electronics Co (005930.KS)) did this too. A couple of years ago, Samsung designed Qualcomm out, but Qualcomm didn’t even know until it was close to time to ship” Samsung’s phones, Rasgon said.

Reporting by Stephen Nellis in Bengaluru and Liana B. Baker in San Francisco; Editing by Kenneth Maxwell

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Asia shares, crude oil buoyant; euro near three-month lows

SYDNEY (Reuters) – Asian shares climbed on Monday and crude oil rose to a 2-year top, while the euro loitered around a 3-month low as the European Central Bank’s decision to extend its stimulus further fattened the dollar’s yield advantage.

A man looks at a stock quotation board outside a brokerage in Tokyo, Japan, April 18, 2016. REUTERS/Toru Hanai

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.2 percent. The index is up 3.4 percent so far this month.

Japan’s Nikkei .N225 nudged 0.2 percent higher, while Seoul shares .KS11 climbed 0.7 percent.

Global share markets have been on an uptrend since the start of the year, helped by solid corporate earnings and positive economic data across major countries.

The world share index .MIWD00000PUS has surged 17.6 percent so far in 2017.

“The continuation of quantitative easing (QE) in Europe at a time when Japan remains locked on QE and the U.S. is only tightening gradually highlights that global monetary conditions will remain easy for a long while yet,” said Shane Oliver, head of investment strategy at AMP Capital.

“This along with strong economic growth and earnings, largely explains why global share markets are so strong.”

On Friday, the Nasdaq .IXIC added 2.2 percent, the S&P 500 .SPX climbed 0.81 percent and the Dow .DJI rose 0.14 percent.

Amazon (AMZN.O), up 13.2 percent, was responsible for the biggest boost to the S&P 500 after reporting a quarterly sales surge.

Tech giant Apple Inc (AAPL.O) is due to report on Thursday.

The dollar index .DXY was a touch softer, after two straight days of gains helped by upbeat third-quarter U.S. GDP data. The U.S. economy grew at a 3.0 percent annualized rate from July to September, showing resilience after recent storms.

Investors are now focused on the impending appointment of the Federal Reserve chair, with speculation rife that Fed governor Jerome Powell is the favored suitor.

Wagers that Powell, who markets see as a less hawkish candidate, will be the chosen one tempered the dollar’s advances and dragged 2-year Treasury yields off a nine-year top US2TY=RR. An announcement is expected this week.

“Markets are evidently still intent on having some fun, speculating on whether the next Fed chair will be trying to pull the Fed in a more hawkish direction or whether continuity will be the name of the game,” said Ray Attrill, head of FX strategy at National Australia Bank.

In Europe, political uncertainty and the ECB together weighed on the common currency, marking its biggest weekly loss of the year.

The euro EUR= steadied at $1.1602, not far from $1.1573 which was the lowest since July 20.

Spain sacked Catalonia’s regional government on Friday, dissolved the Catalan parliament and called a snap election after Catalonia declared independence from Spain.

The ECB’s decision last week to extend its bond purchases into September 2018 also hurt the euro, driving yields on two-year German bunds lower DE2YT=RR.

The premium that 2-year U.S. debt pays over 2-year German yields is now the widest since mid-1999, making it more attractive to borrow in euros to buy dollars.

In commodities, Brent crude LCOc1 rose to $60.63 per barrel, the highest since July 2015, after Saudi Arabia agreed to support the extension of a global oil production cut agreement. [O/R]

U.S. crude CLc1 ticked up 0.32 percent at $54.07 a barrel.

Spot gold XAU= was trading 0.1 percent lower at $1271.20 per ounce. [GOL/]

Reporting by Swati Pandey; Editing by Eric Meijer

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As Trump tax comes to floor, failure could spell stocks selloff

NEW YORK (Reuters) – Investors are increasingly pricing in the effect of a corporate tax cut into the shares of U.S. companies, leaving the market primed for a steep sell-off if the Republican-controlled Congress fails to pass one of President Donald Trump’s top priorities.

FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York, February 10, 2009. REUTERS/Eric Thayer (UNITED STATES)

The benchmark S&P 500 .SPX is up nearly 6 percent from its August lows as the Trump administration has rolled out its tax reform proposal, which would cut corporate taxes to 20 percent from the current 35 percent and allow companies to bring back some of the $2.6 trillion in cash currently held offshore at reduced rates.

Bank of America Merrill Lynch said that a positive boost from taxes “had been priced out of stocks” in July but “has been making a solid comeback.”

Yet there are signs that the Trump administration has little room for error as it gets ready to introduce its tax legislation next week. The House of Representatives narrowly passed a budget measure on Thursday necessary for a vote on a tax bill, with Republicans from such high-tax states as New York and New Jersey among the opponents out of concerns that a bill would eliminate the deduction of state and local taxes.

Trump must also stem potential revolts over a proposal to scale back the level of tax-deferred contributions to 401(k) retirement savings plans, which many middle-class Americans rely on for their retirement.

“The nature of the rally over the last two months has been tax-cut led. If we don’t get a cut then the market is going down” several percentage points, said Edward Perkin, chief equity investment officer at Eaton Vance.

Such a decline would be the first significant sell-off of the year, he said, but would not likely be near the 20 percent decline that signifies the start of a bear market.

A collapse in the tax measure would likely send the S&P 500 down 5 percent or more, Goldman Sachs said in an Oct. 20 note.

“Tax reform will determine the direction of the S&P 500’s next 100 points,” the report said.

Over the last 30 days, roughly 75 companies – ranging from delivery service United Parcel Service Inc (UPS.N) to hotel operator Hilton Worldwide Holdings Inc (HLT.N) – have discussed how they would benefit from a corporate tax cut on conference calls with analysts, according to a Reuters analysis of earnings call transcripts, a sign that Wall Street is increasingly focused on the tax bill.

The White House’s plan would boost 2018 S&P 500 adjusted earnings per share by 12 percent, to $156, Goldman Sachs estimates, while leading to an additional $75 billion in stock buybacks.

Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, said that Trump’s clashes over the last week with members of his own party could threaten the tax bill’s success because it could alienate other Republicans. Because Republicans hold only a slim 52-48 seat advantage in the Senate, Trump can afford to lose only two votes.

“When the possibility of a defection of some Republican senators increases, that kind of puts the whole tax reform thing in jeopardy. He needs them all,” Tuz said.

At the same time, the 14.4 percent year-to-date rally in the S&P 500 leaves the index primed for a decline of at least 5 percent, said Barry James, a co-portfolio manager of the $3.1 billion James Balanced Golden Rainbow fund (GLRBX.O).

The S&P 500 trades at a trailing price-to-earnings ratio of 22.6, and a forward price-to-earnings ratio of 19.5, both well above their historical norms.

“We’re at levels today that are historically very risky for stocks and we’re primed for a correction,” James said. “If there’s not the tax cut that everyone is expecting, then the correction could be a whole lot more serious.”

Reporting by David Randall and Caroline Valetkevitch; Editing by Jennifer Ablan and Leslie Adler

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CVS deal for Aetna could help retailer face Amazon entry: analysts

(Reuters) – U.S. pharmacy operator CVS Health Corp’s (CVS.N) move to buy health insurer Aetna Inc (AET.N) could shore-up CVS’ vulnerable pharmacy business and spur another round of dealmaking in an industry fearing Amazon’s arrival, analysts said.

Shares of Aetna, the third-largest U.S. health insurer, closed down 3 percent on Friday after closing 12 percent higher on Thursday on reports of the deal. CVS Health was down 5.9 percent.

CVS Health has made an offer to acquire Aetna for more than $200 per share, or over $66 billion, making it the biggest deal of the year. [nL2N1N12JO]

“A potential combination would diversify CVS profit streams ahead of an Amazon entry and set the stage for a new healthcare-retail delivery model,” Morgan Stanley analysts wrote in a note.

Amazon.com Inc (AMZN.O) is planning to move into online prescription drug sales, multiple media reports have said, potentially posing an existential threat to brick-and-mortar pharmacies.

That possibility has hit shares of most drugstore operators on fears that the online retailer would leverage its vast ecommerce platform in prescription drug sales.

“We believe CVS does need to respond to the potential threat and strike a different path,” Cowen & Co analyst Charles Rhyee said in a note.

A deal would make CVS-Aetna a one-stop shop for customers’ health care needs – ranging from employer healthcare and government plans to managing benefits and running drug stores.

FILE PHOTO: The CVS logo is seen at one of their stores in Manhattan, New York, U.S., August 1, 2016. REUTERS/Andrew Kelly/File Photo

The vertical integration of retail pharmacy, PBM, and insurers fits with broader healthcare themes of expanded access, consumerism and cost reduction, Jefferies analysts said, adding that the deal chatter was not a complete surprise.

“It would address each company’s need for a fresh script.”

The deal between companies in two very concentrated industries will likely prompt concern about their rivals having an access to market, or foreclosure, two antitrust expert said.

But the deal will likely win approval from antitrust enforcers because the two companies are in different businesses along the same supply chain, or a vertical merger, other experts said.

“I don’t doubt that there will be a lot of people that will be concerned about such a huge deal,” said Andre Barlow of the law firm Doyle, Barlow and Mazard. “But articulating an antitrust theory (to stop it) is difficult.”

The two companies overlap in at least one area – providing Medicare Part D pharmacy prescription drug coverage. Analysts at Evercore ISI estimated that 23 percent of Aetna’s Part D clients were in counties where there may be antitrust concerns but these could likely be remedied through asset sales.

Some analysts said the deal could also trigger a wave of consolidation across the industry.

It could be a possible catalyst for higher health insurance sector valuation, BMO Capital Markets analyst Matt Bosch said, adding that WellCare Health Plans (WCG.N), Humana (HUM.N) and Centene (CNC.N) could be possible acquisition targets.

Aetna earlier this year scrapped plans to merge with rival Humana after antitrust enforcers said that the combination and a rival deal between Anthem Inc (ANTM.N) and Cigna Corp (CI.N) were anti-competitive.

Reporting by Ankur Banerjee in Bengaluru; Additional reporting by Diane Bartz in Washington and Carl O’Donnell in New York; editing by Saumyadeb Chakrabarty and Cynthia Osterman

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CVS makes more than $66 billion bid for Aetna: sources

(Reuters) – U.S. pharmacy operator CVS Health Corp has made an offer to acquire No. 3 U.S. health insurer Aetna Inc for more than $200 per share, or over $66 billion, people familiar with the matter said on Thursday.

FILE PHOTO: The CVS logo is seen at one of their stores in Manhattan, New York, U.S., August 1, 2016. REUTERS/Andrew Kelly/File Photo

A deal would merge one of the nation’s largest pharmacy benefits managers and pharmacy operators with one of its oldest health insurers, whose far-reaching business ranges from employer healthcare to government plans nationwide.

Aetna shares rose more than 11 percent, or $18.48, to $178.60, while CVS shares fell 3 percent, or $2.22, to $73.31, after the Wall Street Journal first reported on the talks earlier on Thursday.

Healthcare consolidation has been a popular route for insurers and pharmacies, under pressure from the government and large corporations to lower soaring medical costs.

Pharmacy benefit managers (PBMs) such as CVS negotiate drug benefits for health insurance plans and employers, and have in recent years taken an increasingly aggressive stance in price negotiations with drugmakers.

They often extract discounts and after-market rebates from drugmakers in exchange for including their medicines in PBM formularies with low co-payments.

A tie-up with Aetna could give CVS more leverage in its price negotiations with drug makers. But it would also subject it to more antitrust scrutiny.

The deal could also help counter pressure on CVS’s stock following speculation that Amazon.com Inc is preparing to enter the drug prescription market, using its vast e-commerce platform to take market share from traditional pharmacies.

CVS made the offer earlier this month, although the two companies have been in discussions about a potential deal for several months, the sources said.

These talks were carried out primarily between CVS Chief Executive Officer Larry Merlo and Aetna CEO Mark Bertolini, and were aimed at making executives comfortable with the idea of a merger, the sources said.

CVS and Aetna started discussing terms only recently, and a deal is not expected for a few weeks, one of the sources added, cautioning that the pace of the talks could accelerate given the publication of the negotiations.

The sources did not specify how much of CVS’ bid is cash versus stock, but given CVS’s and Aetna’s market capitalizations of $77 billion and $54 billion, respectively, a substantial stock component is likely in any deal.

Aetna and CVS declined to comment.

Aetna earlier this year closed the door on a deal with rival insurer Humana Inc after antitrust regulators said that combination and a rival deal between Anthem Inc and Cigna Corp were anti-competitive.

UNCERTAIN TIMES AHEAD

The deal comes after years of major changes to the U.S. health insurance industry under former President Barack Obama, whose 2010 Affordable Care Act created new ground rules for how insurers operate and expanded insurance to 20 million more Americans.

Republican President Donald Trump has promised to turn back many of the Affordable Care Act’s facets, but Congress has not been able to agree on a repeal or a replacement. The lack of progress – as well as Trump’s executive order to bring down healthcare costs – has created uncertainty for insurers as they head into 2018.

After the deal with Humana fell apart, Bertolini has said that he did not believe large deals were possible in the insurance industry.

But analysts have speculated about a tighter partnership between Aetna and CVS since early in the year. CVS and Aetna have a long-term contract in which CVS has provided pharmacy benefits for Aetna customers.

“Aetna really makes the best sense” said Jeff Jonas, a portfolio manager at Gabelli Funds. “It’s their largest client on the PBM side. They really have similar views as to where healthcare should go, which is to the retail setting.”

Jonas, who owns both Aetna and CVS shares, noted the two companies were already talking about working together on Minute Clinic, on home infusion and other services.

“To go from that to a full merger is a big step but it’s not huge,” he said.

Last week No. 2 insurer Anthem Inc. announced plans to manage its own pharmacy benefits with the help of CVS, a move that would give it a set-up similar to UnitedHealth Group Inc. and its Optum unit. Insurers want more control over the pharmaceutical component of care as they implement pricing schemes with doctors and hospitals that are based on health outcomes, not just procedures.

They also want to work on driving down costs, and as a pharmacy benefit manager, would negotiate directly with drugmakers.

Reporting by Carl O’Donnell, Greg Roumeliotis, Caroline Humer and Bill Berkrot in New York; Editing by Dan Grebler and Diane Craft

Our Standards:The Thomson Reuters Trust Principles.

Asian stocks stall on Wall Street pullback, euro gains before ECB

TOKYO (Reuters) – Asian stocks stalled on Thursday, weighed as Wall Street shares pulled back from record highs, while the euro stretched gains ahead of a European Central Bank policy meeting at which it could take a major step away from accommodative policy.

Passersby are reflected in an electronic stock quotation board outside a brokerage in Tokyo, Japan, October 23, 2017. REUTERS/Issei Kato

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.05 percent. Australian stocks dipped 0.2 percent while South Korea’s KOSPI .KS11 lost 0.1 percent.

Japan’s Nikkei .N225, which had snapped a 16-day winning run the previous day, rose 0.35 percent.

U.S. stocks fell on Wednesday on a batch of soft quarterly earnings, with the Dow Jones Industrial Average .DJI suffering its worst day in seven weeks after rising to a record peak the previous session. [.N]

In currency markets, the euro added to overnight gains to reach a six-day high of $1.1820 EUR=, prompted by expectations that the ECB would cut back on its bond-buying stimulus and take the biggest step yet in unwinding years of loose monetary policy.

The central bank, however, is still concerned about low inflation and is expected to accompany the tapering with an extension of the stimulus in a “less-but-for-longer” move.

“The focal point is how long the ECB decides to spend on tapering its bond buying. If the ECB opts to spend more than six months to taper, it will lead to thoughts that it won’t be able to move onto hiking interest rates until 2019,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

“The ECB could be seen as dovish in such a case and in turn weigh on the euro.”

The dollar was 0.1 percent lower at 113.605 yen JPY=.

The greenback rose to a three-month high of 114.245 yen overnight as the benchmark 10-year Treasury yield spiked to a seven-month peak of 2.475 percent US10YT=RR.

But the dollar pared the gains as the Treasury yield retraced its rise amid the drop in Wall Street shares. The 10-year Treasury yield last stood at 2.429 percent.

The dollar index against a basket of six currencies was down 0.1 percent at 93.601 .DXY, its lowest in six days.

The pound added to overnight gains and brushed $1.3276 GBP=D3, its highest in 10 days. Sterling climbed almost 1 percent the previous day after stronger-than-expected U.K. growth data cemented expectations the Bank of England will raise interest rates next week.

Another big mover was the Canadian dollar, which slid 1 percent overnight to a three-month low of C$1.2816 per dollar CAD=D4 after the Bank of Canada left interest rates steady as expected but was seen to have sounded dovish in its policy statement.

U.S. crude oil futures CLc1 was 0.1 percent lower at $52.13 per barrel following data on Wednesday that showed a surprising increase in U.S. crude inventories. [O/R]

Brent crude LCOc1 slipped 0.1 percent to $58.41 per barrel.

Reporting by Shinichi Saoshiro; Editing by Sam Holmes

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Asian shares flat, Nikkei aims for 17th straight gain

TOKYO (Reuters) – Asian shares trod water in early trade on Wednesday, while U.S. Treasury yields and the dollar got a lift following a report Republican senators were leaning towards John Taylor to be the next Federal Reserve chief.

A man is reflected in an electronic stock quotation board outside a brokerage in Tokyo, Japan, October 23, 2017. REUTERS/Issei Kato

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was flat in early trade.

Japan’s Nikkei stock index .N225 was up 0.5 percent in early trading, on track for an unprecedented 17th straight session of gains after the victory of Prime Minister Shinzo Abe’s coalition in Sunday’s election raised investors’ hopes of continued yen-weakening stimulus.

U.S. President Donald Trump used a luncheon with Senate Republicans on Tuesday to get their views on who he should tap to be the next leader of the Federal Reserve, according to senators who attended.

A source familiar with the matter said Trump polled the Republicans on whether they would prefer Stanford University economist John Taylor or current Fed Governor Jerome Powell for the job, and more senators preferred Taylor.

Taylor is seen as someone who may put the central bank on a faster path of interest rate increases.

That gave stocks a lift, and helped send U.S. benchmark 10-year Treasury note yields to their highest since March. The 10-year yield stood at 2.417 percent US10YT=RR in Asian trade, up from its U.S. close of 2.406 percent on Tuesday, when it rose as high as 2.428 percent.

“The U.S. 10-year Treasury yield is heading higher, so that is supporting the dollar in general,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

The dollar was briefly dented on Tuesday by a CNBC report, citing an aide of Senate leader Mitch McConnell, that three GOP Senators may not back the Republican tax bill.

“The base line is that a U.S. tax cut will eventually materialize, and that’s supporting the dollar and pushing up the U.S. Treasury yields,” Yamamoto said.

The Australian dollar skidded 0.5 percent to $0.7741 AUD=D4, after weak consumer price figures prompted investors to pare expectations of further tightening from the Reserve Bank of Australia.

On Wall Street on Tuesday, stronger-than-expected results and forecasts from companies including 3M and Caterpillar also fueled optimism about economic strength, with the Dow Jones Industrial Average .DJI closing at a record high. [.N]

European shares closed mixed on Tuesday ahead of Thursday’s European Central Bank meeting at which policymakers are expected to signal they will take small steps away from their ultra-easy monetary stimulus.

The euro was slightly lower on the day at $1.1757 EUR=, while the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.2 percent at 93.971 .DXY.

The dollar was steady at 113.92 yen JPY=, though a bit shy of a three-month high of 114.10 yen touched on Monday.

Crude oil futures caught their breath after rising more than 1 percent overnight after top exporter Saudi Arabia said it was determined to end a supply glut. Prices also drew support from forecasts of a further drop in U.S. crude inventories as well as nervousness over tensions in Iraqi Kurdistan. [O/R]

Brent crude LCOc1 was up 8 cents at $58.41 a barrel, while U.S. crude CLc1 shed 1 cent to $52.46.

Reporting by Lisa Twaronite; Editing by Sam Holmes

Our Standards:The Thomson Reuters Trust Principles.

Asian shares hover near recent highs; China Congress eyed

SYDNEY (Reuters) – Asian shares held within striking distance of recent decade highs on Tuesday even as Wall Street fell from record levels, while currencies kept to narrow ranges ahead of key economic events.

Passersby are reflected in an electronic stock quotation board outside a brokerage in Tokyo, Japan, October 23, 2017. REUTERS/Issei Kato

Investors are closely watching China and the 19th Communist Party Congress, which winds up on Tuesday and at which President Xi Jinping is expected to release the composition of the Standing Committee – the apex of power in the country.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.1 percent firmer at 549.71 points, not far from a 10-year high of 554.63 set last week.

Australian shares also edged higher and back toward a 5-1/2 month peak touched on Monday, while Japan’s Nikkei .N225 fell 0.2 percent from a 21-year high.

“Despite a lack of any real movement in markets, we know there are landmines and event risk to work through and this creates opportunity for short-term traders,” said Chris Weston, chief strategist at IG Markets.

“Whether the gains can continue this week is obviously yet to be seen. I remain a bull, but of the view that these markets are tired, fatigued and need new information to fuel the beast.”

In the United States, the Dow Jones Industrial Average .DJI fell 0.23 percent, the S&P 500 .SPX lost 0.40 percent and the Nasdaq Composite .IXIC slipped 0.64 percent.

Corporate results will dominate near-term sentiment with earnings from General Motor (GM.N), McDonald’s (MCD.N), and Lockheed Martin (LMT.N) due later in the day.

European STOXX 600 shares rose 0.16 percent, although Madrid’s bourse IBEX .IBEX shed 0.6 percent as Spain’s crisis entered another week.

Madrid took the unprecedented step of firing the government of Catalonia on Saturday in a last resort to thwart its push for independence. Catalan leaders called for civil disobedience in response.

In Germany, the far-right Alternative (AfD) party is set to clash with other parties over its nomination for a senior parliamentary post when the Bundestag meets on Tuesday.

The political tensions have weighed on the euro EUR= which hovered near two-week lows at $1.1752. The market is on edge ahead of a European Central Bank meeting on Thursday where it is expected to announce some form of policy tapering.

Investors were also biting their nails as suspense builds over who might be the next chair of Federal Reserve after Janet Yellen’s term expires in February.

U.S. President Donald Trump has indicated an announcement is expected “very shortly.”

The market is betting on Federal Reserve Governor Jerome Powell as the likely choice while Trump is also weighing on Stanford University economist John Taylor and current Federal Reserve Chair Janet Yellen.

The dollar index .DXY inched lower to 93.8 but stayed in sight of a recent two-month peak.

The New Zealand dollar NZD= rose 0.2 percent from near five-month lows with investors focused on any policy tidbits out of the country’s new Labour government.

In commodities, spot gold XAU= was mostly unchanged at $1282.26 an ounce.

Oil prices were little changed as supply disruptions in Iraq dented exports by OPEC’s second-largest producer and U.S. drilling rates showed a slowdown.

Brent crude LCOc1 added 6 cents to $57.43, while U.S. crude CLc1 rose 3 cents to $51.93 a barrel.

Reporting by Swati Pandey; Editing by Sam Holmes

Our Standards:The Thomson Reuters Trust Principles.

Japan shares at two-decade top, yen at three-month low on Abe win

SYDNEY (Reuters) – Japanese shares jumped on a weaker yen on Monday as an election win for Shinzo Abe’s ruling bloc gave a green light for more super-easy policy stimulus, while the euro eased as Spain’s constitutional crisis aggravated concerns about political unity in the region.

A Japan Yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White/Illustration

The U.S. dollar was the major beneficiary as President Donald Trump and Republicans took a small step toward tax cuts, boosting Wall Street stocks and lifting bond yields.

Japan’s Nikkei .N225 raced up 1 percent to its highest since 1996 after Prime Minister Abe looked to have easily won in national elections over the weekend.

Investors assumed the victory would allow the Bank of Japan to continue with massive monetary easing that depresses bond yields and the yen, even as the U.S. Federal Reserve seems determined to hike rates again in December.

“This should extend the lifespan of ‘Abenomics’, including the BOJ’s mega stimulus,” wrote analysts at the Blackrock Investment Institute.

“We see the outcome as a mild positive for Japanese equities, and as a mild negative for the yen and Japanese government bonds.”

The dollar rose 0.4 percent to reach 113.99 yen JPY=, the highest since mid-July when it got as far as 114.49 before running out of puff. A break there would open the way to the March peaks around 115.51. Against a basket of currencies, the dollar edged up 0.2 percent .DXY.

The yen even slipped against the euro EURJPY=, which was having its own troubles as the Spanish government urged Catalans to accept its decision to dismiss their secessionist leadership and to take control of the restive region. [L8N1MX0HS]

The nation’s biggest political crisis in decades enters a decisive week as Madrid tries to impose its control, although investors have so far assumed the political strife would not spread elsewhere in the European Union.

The euro eased a modest 0.25 percent on Monday to $1.1758 EUR= and has strong chart support around $1.1729.

It faces another hurdle on Thursday when the European Central Bank meets amid much talk it will cut back the amount of assets it buys every month, but also extend the program.

“As we have argued for some time now, the length of time the (quantitative easing) program runs for matters more than monthly size,” said analysts at RBC Capital Markets.

“So while we look for a reduction by at least 30 billion euros in net terms … we also expect that the ECB will keep the program open ended.”

Asian share markets could get a tailwind from Wall Street’s record finish on Friday when the passage of a U.S. Senate budget resolution bolstered hopes that President Trump’s tax-cut plan may move forward.

The Dow .DJI ended Friday with gains of 0.71 percent, while the S&P 500 .SPX rose 0.51 percent and the Nasdaq .IXIC 0.36 percent.

Early Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was a whisker firmer while South Korea .KS11 put on 0.3 percent.

In commodity markets, a firmer dollar nudged gold XAU= down 0.4 percent to $1,275.07 an ounce.

Oil prices started firmer on Monday following a sharp decline in Iraqi crude exports due to tensions in the Kurdistan region. [O/R]

Brent crude LCOc1 rose 16 cents to $57.91 a barrel, while U.S. crude futures CLc1 added 28 cents to $52.12.

Editing by Peter Cooney and Sam Holmes

Our Standards:The Thomson Reuters Trust Principles.

Recent hurricanes take toll on quarterly earnings

SAN FRANCISCO (Reuters) – After raging over the southern United States and Puerto Rico, remnants of hurricanes Harvey, Irma and Maria are now dampening U.S. corporate profits.

Traders gather for the IPO of Singapore-based Sea Limited on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 20, 2017. REUTERS/Brendan McDermid

While the deadly storms in August and September slammed insurers who are now on the hook for billions of dollars in damaged property, many retailers, manufacturers and banks are also feeling the pain.

Over half of S&P 500 companies reporting third-quarter results in recent weeks, including Harley-Davidson (HOG.N), Delta Airlines and Costco (COST.O), have said on conference calls with investors that the storms harmed their businesses to some degree, according to a Thomson Reuters analysis.

“We estimate the impact of the hurricanes accounted for approximately 1.5 to 2 percentage points of Harley-Davidson’s retail sales decline during the quarter,” the motorcycle maker’s Chief Financial Officer, John Olin, told investors on Tuesday after reporting a decline in quarterly profit per share.

The hurricanes were part of the worst Atlantic hurricane season in over a decade, destroying or damaging homes, businesses and public infrastructure, killing over 200 people and paralyzing normal economic activity.

Senior executives of least 48 S&P 500 companies have told investors on quarterly conference calls that their businesses had been negatively affected by the storms.

At least 12 companies, including U.S. Bancorp (USB.N) and Abbott Laboratories (ABT.N), also said their businesses were hurt by a September earthquake that killed 369 people in Mexico, a major market for U.S. firms.

American International Group (AIG.N) has estimated pretax losses of about $1 billion each from Harvey and Irma, up to $700 million from Maria and additional catastrophe losses, including Mexico’s earthquake, of about $150 million.

Travelers Cos Inc said on Thursday it recorded $700 million in catastrophe losses from the destruction wrought by Hurricanes Harvey and Irma, although its quarterly profit fell less than Wall Street feared.

S&P 500 companies on average are expected to have increased their non-GAAP earnings per share by 4.2 percent in the third quarter, the slowest growth in a year, according to Thomson Reuters I/B/E/S.

Excluding insurers, which are expected to have suffered a 63.3-percent decline in quarterly profits, S&P 500 earnings are expected to be up 6.9 percent.

The lingering effects of Hurricanes Harvey and Irma hobbled activity at factories in September and blunted a rebound in U.S. industrial production, the Federal Reserve said on Tuesday

Still, the storms have not stopped the stock market’s record advance. Up 15 percent in 2017, the benchmark S&P 500 is trading at 18 times expected earnings, a multiple not seen since 2002, according to Thomson Reuters Datastream.

The S&P 500 property and casualty index .SPLRCINPC on Friday hit a record high, more than recovering from a selloff that coincided with the Harvey’s destruction. Many investors believe that insurers will raise premiums to make up for losses, and that those higher premiums will become permanent.

Dover (DOV.N) Chief Executive Robert Livingston said overtime and other related expenses to get back up to speed had cost the manufacturing company as much as 2 cents per share in the quarter after Harvey forced it to close its Texas factories for four or five days.

Hand tool maker Snap-On (SNA.N) said the storms cost it about $8 million in sales in Texas, Florida and Puerto Rico.

“Timing of both further disruption and rebuilding are unclear,” Snap-On Chief Executive Nicholas Pinchuk told analysts on Thursday.

Waiving late fees and increasing reserves for customer credit cost PayPal Holdings (PYPL.O) about 1 cent per share in the past quarter, leaving its non-GAAP EPS at 46 cents.

Procter & Gamble (PG.N) on Friday said it had to suspend operations along the Gulf Coast due to the hurricanes and in Mexico because of the earthquake.

Some companies, including Constellation Brands (STZ.N), said the hurricanes had only a minor negative on their results. For others, the storms will mean new business.

With 600,000 homes in Texas and Florida in need of re-roofing, shares in building materials firms USG Corp (USG.N), Owens Corning (OC.N) and Eagle Materials Inc (EXP.N) have jumped between 17 percent and 30 percent since just before Harvey struck Texas.

Home Depot (HD.N) has surged 9 percent since the end of August on bets that homeowners repairing damage will spend more at its stores.

“They were hurricanes of a massive size that caused significant disruption to labor forces and spending,” said Phil Blancato, head of Ladenburg Thalmann Asset Management in New York. “But it’s a pendulum, early on it has an impact, but as the rebuild gets going and there’s an inventory ramp-up, I think it swings back the other way.”

Reporting by Noel Randewich; Editing by Bernadette Baum

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