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US stocks ripped higher on Monday and Treausries faced selling pressure as Wall Street responded to the first round of the French election.

Shortly after the opening bell, the S&P 500 rose 0.95 per cent to 2,370.8, the Dow Jones Industrial Average gained 0.91 per cent to 20,735.6 and the Nasdaq Composite rallied 1 per cent to 5,970.7. The Nasdaq hit a new record high for the first time since April 5.

Selling was strong for US government debt, with investors once again pushing away from haven assets. The 10-year Treasury yield jumped 0.05 percentage points to 2.2981 per cent — the highest level in two weeks.

Gold dropped 1.1 per cent to $1,270 a troy ounce.

The shift into stocks and away from bonds mirrored similar moves globally. The pan-European Euro Stoxx 600 climbed 1.9 per cent, with French stocks surging 4 per cent and German equities rallying 3 per cent.

For US investors, the focus may shift back to Washington after President Donald Trump on Friday said a plan for tax reform may be presented as soon as Wednesday. Wall Street has been salivating over the prospect of lower corporate taxes and other adjustments that could be a boon to corporate America’s bottom line. However, the failure of the administration’s attempt to repeal and replace Obamacare highlighted the tough process of passing sweeping legislation in Congress.

“While equity markets would particularly welcome a cut in corporate taxes, there are significant questions about the overall size of the plan and whether it would include the ‘border adjustments’ proposed by some in the House of Representatives,” said David Kelly, chief global strategist at JPMorgan Funds.

“There is also a more immediate question of how much detail will be in [the] announcement and whether it can garner enough congressional support to pass this year, particularly if it results in a significant increase in the budget deficit”.

Copyright The Financial Times Limited 2017. All rights reserved.
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