December 18, 2017 / 9:58 AM / in 5 months

GLOBAL MARKETS-U.S. tax cut outlook drives stocks but dents dollar

* MSCI World stock index hits record level

* Dollar dips as FX traders more cautious

* Portuguese bond yields tumble on rating upgrade

* Tepid debut for CME bitcoin futures

By Alasdair Pal

LONDON, Dec 18 (Reuters) - Global stock markets hit record highs on Monday on expectations that a U.S. tax bill could soon pass, though a more cautious reading of the draft law’s prospects among currency traders put the dollar under pressure.

Top U.S. Republicans said on Sunday they expected Congress to pass the tax code overhaul this week.

Global stock markets have surged this year, in part on expectations of the reform, which is seen boosting corporate profits and triggering share buybacks and higher dividend payouts.

The benchmark MSCI World index, which tracks shares in 47 countries, rose 0.41 percent on Monday to hit a record high, putting it on course for its best year since 2009.

The pan-European Stoxx 600 index was up 0.9 percent, less than 2 percent off a two-year high hit at the start of November

Germany’s DAX index rose 1.2 percent, with the U.K.’s FTSE 100 up 0.5 percent.

With little in the way of major economic data this week, the bill was likely to remain in focus for stock market investors, according to Mike van Dulken, head of research at Accendo Markets.

“Ahead of bill being signed into law, any more updated guidance from U.S. corporates, showing potential earnings improvement from the reform, will be closely watched,” he said.

The dollar index fell 0.2 percent against a basket of major currencies, however, with strategists saying forex traders had adopted more of a wait-and-see attitude to the bill.

PORTUGAL IN FOCUS

In fixed income markets, Portuguese bonds were the stand-out performers, with yields hitting their lowest since early 2015 after an unprecedented two-notch sovereign credit upgrade from Fitch.

Friday’s shift means the country now holds an investment grade from two of the three major rating agencies and could soon return to major bond indices.

Portugal’s ten-year bond traded decisively below its Italian equivalent on Monday. The last time it did so for a sustained period was in early 2010.

“There is very much a shift in the architecture in the European government bond market,” said DZ Bank rates strategist Daniel Lenz.

In Asia, the Indian rupee fell as much as 1.1 percent before reversing all its losses to trade up 0.07 percent, as it became clear that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) would comfortably win an election in his home state of Gujarat.

Futures of soaring cryptocurrency bitcoin received a lukewarm reception at their launch on the CME Group exchange late on Sunday.

The front-month contract was down 0.7 percent on Monday, below the $19,500 reference price set by the exchange for the January contract.

Oil prices rose amid an ongoing North Sea pipeline outage and as a strike by Nigerian oil workers threatened the country’s crude exports. (Reporting by Alasdair Pal, additional reporting by Dhara Ranasinghe in London and Swati Pandey in Sydney; editing by John Stonestreet)

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