Stocks And The US Dollar Respond To Strong US Data

Originally published by AxiTrader h2 Key Takeaway/h2

It’s the data.

US consumer confidence rose sharply this month with the conference board last night reporting a 9.5 point jump to 125.6. That’s a 16 year high and goes a long way to support the notion that the US economy is doing well – even without the added stimulus of Trumponomics and Trumpflation. Other data releases supported this notion.

So it’s no real surprise that after turnaround Tuesday spread from the ASX in Australia, swept through most of Asia and then Europe and this morning we have solid gains in the US with the big three indexes up in a range between 0.6% to 0.8% as I write.

As a result the US dollar also found its feet with USD/JPY back above 111, euro dipped under 1.08, and sterling down 0.9% at 1.2440 as traders await British PM May to formally trigger Article 50 tonight Australian time. The better tone in markets also allowed the Australian dollar to climb off the mat after it fell to a low of 0.7588 in early European trade last night.

Bonds are a little higher in rates this morning on the back of the data and in possible the most positive sign of the night the German 2-year Schatz sale “failed” last night as investors grow in confidence that marine Le Pen is falling far enough behind Emmanuel Macron that she can’t win the French presidential election.

On commodity markets copper and iron ore are higher, oil has bounced sharply after a Libyan supply disruption and more chat of a production cut extension. Elsewhere gold failed again just below the 200 day moving average.

• S&P 500 +17 (0.73%) 2358 (7.53 am Sydney)
• Dow Jones Industrial Average +150 (0.73%) 20701
• Nasdaq 100 +35 (0.6%) 5,875
• SPI 200 +13 (0.22%) 5,826
• AUD/USD 0.7632 +0.25%
• Gold $1251 -0.18%
• WTI Oil $48.42 +1.45%

• Yesterday I put out a piece showing that the Trumponomics rally in stocks is based in the reality that the data flow across the globe in recent month has consistently shot the lights out relative to expectations. To reiterate, it’s not just about hope of change via president Trump’s policies. It’s about actual improvement in dataflow and a real sense that the globe is reflating. So on the day that consumer confidence hit a 16 year high is it any surprise that stocks are having a solid day. Equally the preliminary release of trade balance for February has had some folks upgrading their forecasts for US Q1 GDP back into the mid 1.5% region.

• This is an important point. We can all have rhetorical views about Trumponomics and its stimulus. Traders can have personal views about the president and his policies, and I can say that I think the failure of health care threatens his ability to delivery on tax and infrastructure. But for the moment the data flow in the US and across the globe continues to support the stock market rally.

• Now that doesn't mean I'm suddenly bullish and have abandoned my expectation that the S&P is headed back to 2259. But it's simply a reflection that its the data as much if not more than Trump which is supporting the market. So here’s the chart again:

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• Elsewhere the latest update of the French election poll seems to confirm that Emmanuel Macron is the most likely winner of the two-stage contest. It’s a result I think Marine Le Pen sense too because she has been defending the impacting of a Frexit saying it would be too disruptive and last night she added the Franc “probably” wouldn’t fall if France left the bloc and got its old currency back. Her argument that the euro is too low for Germany and too high for France meaning the German currency would appreciate but the France stay where it is neatly fits her narrative but is likely well off the mark – sorry the Franc