MORNING ROLL CALL
The Trump ‘put’ trade fades, as does the U.S. dollar value whilst sterling rises, despite imminent Article 50 invocation
The secular, U.S. equity markets’ rise experienced since November (since the election of Trump), has not been underpinned by: sound fundamentals, economic confidence, or competence. The recent rally has come courtesy of the “huge” tax cuts promise. Hence the reason that USA banking equities have risen by (on average) circa 20%, with Goldman Sachs’ post presidential election share price boost, reaching circa 35% at one point.
Now that Trump has failed to push through his repeal of the Obama Affordable Care Act, investors and analysts are questioning if the republicans do indeed have full control over both lawmaking parliamentary houses and are therefore busily making presumptions that he’ll struggle to implement any of his election promises; the Mexican wall, the one trillion infrastructure spend, tax cuts to corps and for the fabled USA middle class.
However, it must be noted that; despite the secular rally fading and the DJIA registering its longest series of losing days since 2011, USA equities on the SPX are still 17.5% higher year on year, therefore it’s a little too early to panic. If plotting a trend using Fibonacci retracement, we’d need to see a 23.6% pull back from the recent high, plotted versus the recent November 2016 low, in order to consider a correction to have taken place, which seems unlikely at the current time.
The SPX and the DJIA closed down 0.10% and 0.22% respectively, both clawing back losses seen earlier in the New York session and on the futures market pre-open, where the SPX was set to open 0.9% down. The small caps Russell index closed up, as did the NASDAQ; by circa 0.2%.
There was little in the way of fundamental economic calendar news published Stateside on Monday, other than the Dallas manufacturing index, which missed the forecast by coming in at 16.9, significantly below the 24.5 reading registered in Feb.
European markets also sold off moderately during both sessions; euro STOXX 50 closed down 0.20%, FTSE down 0.59%, DAX down 0.57%, CAC down 0.07%. The key European data published on Monday concerned Germany; the raft of IFO business sentiment indices all rising above the economists’ polled forecasts.
Despite the imminent Article 50 invocation by the UK’s government, this coming Wednesday March 29th, sterling powered ahead versus its peers during Monday’s sessions. At one stage breaching R3 versus all its major and the majority of its minor peers. However, the rally did fade towards the end of the day, GBP/USD closing the day at circa 1.256, after (at one point) being up circa one percent on the day. USD/JPY fell by circa 0.7% to 110.6, EUR/USD rising by up to circa 0.8% on the day, to eventually close out at 1.0865. The USA dollar basket index lost approx. 0.4% on the day, it’s gains have now been clipped to circa 1.4% since November.
Gold rose on Monday to reach $1260 per ounce, at one stage rising above its critical 200 day moving average, before pulling back to $1254 at the end of the day, up circa 0.5%. Silver closed the day up to $18.075, rising above the critical psyche handle of $18. WTI oil fell (once again), despite commitments from OPEC members that they’re likely to induce another six month production cut in order to bolster price. Oil closed the day out at $47.63 per barrel.
Economic calendar events for March 28th, all times quoted are London (GMT) time.
12:30, currency impacted USD. Advance Goods Trade Balance (FEB). Despite always running significant deficits, analysts will be looking to see a month on month improvement in this data, the forecast is for a reading of -$66.6b, from -$69.2b previously.
13:00, currency impacted USD. S&P/Case-Shiller Composite-20 (YoY) (JAN). This respected annual house price index is expected to remain unchanged, at 5.6% YoY.
14:00, currency impacted USD. Consumer Confidence (MAR). The conference board confidence survey is one of the most respected (soft data) sentiment surveys to be published on the USA consumer, the expectation is for a reading of 114.0, a slight fall from the previous reading of 114.8.
16:50, currency impacted USD. Fed Chair Janet Yellen Speaks. Investors and analysts will (once again) be listening intently for clues in Mrs Yellen’s narrative, regarding the timing of the future Fed interest rate rises, which her and her colleagues’ forward guidance have indicated are overdue in 2017.
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