Trump's Tax Cuts Drive US Stocks And The Dollar Higher: Market Wrap

 | Feb 10, 2017 10:59

Originally published by AxiTrader h2 Key Takeaway/h2

Positivity is the new black.

That’s the sentiment today as traders sell a little gold, US and German and US bonds, buy stocks, European periphery bonds as well as buying in the US dollar.

The change in tack, coming just a day after the headline writers were want to say the Trump reflation rally had ended, came after a neat confluence of strong US data and comments from president Trump that his tax plan is only week’s away.

Don’t underestimate the impact of news overnight, a piece of information traders probably assimilated most positively, was a poll in France which said Marine Le Pen would win round one of the French election but then get clobbered by a margin of almost 2:1 in the run off election. French stocks and bonds outperformed as a result.

h2 What You Need To Know/h2
  • S&P 500 +15 (0.63%) 2309 (7.37 am Sydney)
  • Dow +120 (0.61%) 20,176
  • Nasdaq 100 +36 (0.63%) 5718
  • SPI 200 +26 (0.5%) 5636
  • AUDUSD 0.7630 -0.1%
  • Gold $1231 -0.82%
  • Oil $53.05 +1.36%
h2 International/h2
  • Stocks are higher, and bond rates too, after strong data in the US and comments from President Trump the tax plan is coming.
  • With about 90 minutes to go before the close the S&P 500 is up 15 points for a 0.63% gain. 389 stocks in the index are higher with only basic materials (-0.33%) and Utilities (-1.04%) in the red. The latter’s fall suggest animal spirits are back from their little hiatus.
  • On the other US indexes the Dow Jones Industrial Average is also up nicely with a 0.68% to 20188, and the Nasdaq 100 is a similar amount. The broader Russell 2000 is up an incredible 1.45%. Animal Spirits folks.
  • On the data front jobless claims printed 234,000 – much better than expected with wholesale inventories for December up 1%. Both data suggesting the US economy is doing okay.
  • ON president Trump, as a father I get his desire to stand up for his daughter Ivanka – any dad would. But as POTUS it plays badly because as I noted yesterday that worries traders, investors, and me that the president might get bogged down in side issues. So like the rest of the market, I was pleased to here he is moving forward on his tax plan. I think that repointing toward his policy platform is what has buoyed investor sentiment.
  • Speaking to CEO’s of US airlines he said his “phenomenal” tax plan would be out in the “next two or three weeks.
  • MARK THE DATE - Janet Yellen will address congress February 14.
  • Speaking of the Fed St Louis recalcitrant rate hiker James Bullard said overnight that the Fed might only hike once in 2017. Rembert he’s the fellow who believes that the US economy has paradigm shifts in economic growth which are then sticky. He believes the US is currently in a low growth/inflation paradigm presently.
  • Bullard said “It is unlikely that fiscal uncertainty will be meaningfully resolved by the March meeting. We don't have to move. We have a lot of fiscal uncertainty. Why not wait until that is more clearly resolved?". That means he might shift his paradigm when we do actually get that information though.
  • Data out of Germany might have given US trade negotiator peter Navarro some ammunition with the 2016 trade surplus hitting a new record level of 252.9 billion euros. Two other things Germany is doing are interesting as well. Reuters reports it’s bringing its gold horde home faster than expected – trouble ahead? – and it is going to seek to keep recent G20 language on trade, currencies, and climate change during its presidency.
  • Iran is having a bit of fun with the Trump administration and was again goading it overnight. I’m paraphrasing based on a translation I heard but the Iranians effectively said they are good neighbours, will continue to be, and aren’t scared of American threats because they won’t follow through.
  • On a happier note we now know that Donald Trump has written to Chinese President Li seeking a constructive relationship. I know I’m panglossian but I really do hope that this Administrations early days give way to a more considered plan, and crucially implementation. I’m hopeful president Trump will be like the computer in the 1983 Hollywood movie War Games and learn.
h2 Australia/h2
  • The ASX climbed above the one month down trendline yesterday rising 13 points, 0.23%, to 5664%. That’s a positive as is the overnight move in US stock markets which have pushed the SPI 200 futures contract up 0.5%, 26 points, to 5634. In pure index terms the ASX200 has resistance from the 38.2% retracement level of the down move at 5676 and then the 200 day moving average at 5691. If it can best these levels the outlook will turn.
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