Jan 26 • Morning Roll Call • 1817 Views • Comments Off on MORNING ROLL CALL

The DJIA tops 20,000 as the bulls are set free, the dollar fades, whilst sterling ralliesbetween-the-lines1

So it’s done, it’s over, the finishing line wasn’t limped across, it was shredded and in world record pace. The rise from 19,000 is in fact the second fastest 1,000 point rally in the history of the index, now up 9.5% since Trump’s election.

The DJIA equity market, the list of the 30 most valuable companies in the USA, reached the milestone of 20,000 as it rose by 155 points and 0.78% on the day, to finally close at 20,068. Not to be outdone, the SPX 500; the wider benchmark of the top 500 USA companies, also closed at a new record high, up 0.80% at 2298.

The rally in equities has, at its foundation, a simple cause, with an equally simple effect; the equity markets like Donald Trump. Investors are quite frankly loving his rhetoric, a narrative that is beginning to rapidly morph into action. He’s banging the heads together of American auto manufacturers; telling them to build cars and reopen mothballed factories in the USA. He’s pushing through oil pipeline deals, whilst running roughshod over the environmental concerns, hey, after all, this is a president who believes climate change is a Chinese hoax. He’s promising protectionism and stimulus, on a scale not witnessed in the modern era, to get Americans back to work. And for that last reason his efforts should be applauded, given that most of us in the analyst community, know the BLS labour statistics have been riddled with inaccuracies and obfuscation since the 2008 crisis and subsequent recession.

The labour participation rate in the USA is pitiful, at 62.7%, whilst wages are stuck back at 1980’s levels (in real terms) and the U6 unemployment rate, arguably the real level of unemployment in the USA, reveals that circa 10% of the American workforce is actually unemployed, close on twice the official number.

The greenback weakened versus its ten major peers on Wednesday, as the Dollar Spot Index resumed its slide. It fell by 0.3% and is now scheduled for a fifth straight weekly decline, down nearly 4% off its 2017 high. The dollar’s losses were greatest on Wednesday versus the Canadian dollar and the British pound.

Gold slumped by 1% to $1,201.90, the second day of declines. West Texas Intermediate crude lost 0.8% to drop below $53 a barrel. It settled at $52.75 a barrel due a U.S. government report revealing that crude and fuel inventories increased.

GBP/USD surged past 1.26 for the first time since Dec. 14th, reaching 1.2625, before fading temporarily, to then resume its rise, finally ending the day close to 1.26316. Sterling gained approx.0.6% versus both euro and yen, to 85.11 per euro (a three week high) and 143.33 yen (a two week high).

Economic calendar events for Thursday January 26th, all times quoted are London times.

09:30, currency effected GBP. Gross Domestic Product (YoY) (4Q). The anticipation is that the yearly GDP figure for the UK will print at 2.1%, down marginally from 2.2% previously. Naturally this figure will be closely watched for any Brexit effect, although the consensus is that the UK’s economy is still robust and not feeling any ill effects (yet) of the referendum decision. The real test, in terms of GDP negative effects, will only occur once the UK has left Europe. However, any shock readings in between time, would possibly spook the markets and effect the value of sterling.

13:30, currency effected USD. Advance Goods Trade Balance (DEC). The expectation is that the USA will record a monthly negative trade balance of -$64.4b, versus the previous November reading of -$65. Any major miss could effect the value of the dollar.

13:30, currency effected USD. Initial Jobless Claims (JAN 21). It’s predicted that the weekly jobless claims in the USA will have remained fairly static at 245k, from the previous print of 234k. Whilst seasonal jobs will have been lost post Xmas, there is no expectation for a significant jump in the jobless figure beyond that quoted, which would have a dramatic effect on the markets if there is a major rise.

14:45, currency effected USD. Markit US Services PMI (JAN). It’s the monthly season for Markit Economics’ PMIs. The service sector in the USA is its engine of growth, the expectation is that the reading will have risen to 54.5, from 53.9 previously.

15:00, currency effected USD. New Home Sales (MoM) (DEC). As a consequence of seasonal factors (less new homes are sold in winter) the anticipation is for a drop in new home sales to -1.2%, from 5.2% previously. However, rising mortgage rates are beginning to effect USA citizens’ ability (and desire) to take on the huge levels of debt now required to purchase a new home in the USA.


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