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Trump themes still playing out in markets

Donald Trump’s economic policies remain the number one consideration for world markets. Investors are trying to strike the right balance between positioning for a major dose of US fiscal stimulus and not getting too far committed, given the uncertainty surrounding what policies the new Trump Administration will actually implement.

The  upside momentum in stock markets has stalled in recent days given full valuations; the potentially negative impact of rising bond yields and signs that commodities are correcting. Even so stock markets are holding their levels and the ASX 200 looks set for a firm open this morning supported by a solid performance by banks on US markets on Friday and the weaker $A.

While stock markets are pausing, an issue for markets this week will be whether the sell-off in bonds is going to continue after another lift in US yields on Friday. . A major increase in US fiscal stimulus would improve the outlook for inflation and mean the Fed will need to be more proactive in hiking rates to get in front of the curve. The combination of rising US bond yields and falling commodity prices is putting pressure on the Aussie Dollar.

Boral’s acquisition of the US building products and construction materials group, Headwaters, is neatly timed to benefit from the forecast increase in US infrastructure spending

Myer will be another stock in focus today. Friday’s sales report provided further evidence that Myer’s turnaround strategy is not only well conceived but is being effectively implemented. Traders have been too pessimistic about this strategy and Friday’s big rally may have further to play out as short positions are covered and the stock is re-rated. 


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