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Seasonal selloff continues amid ongoing Trump turmoil

It's not uncommon for stock markets to Starr sliding in the middle of May after news flow from Q1 earnings subsides. Since this year's seasonally strong period recieved an additional boost from a big Presidential honeymoon trade, the question had been what it would take to knock a teetering bull market over the edge.

Growing political uncertainty in the US combined with election results showing fears of political instability in Europe were overblown has sparked a major re-evaluation of political risk around the world. Capital has been leaving risk markets like stocks and the US Dollar with some heading back to Europe, boosting EUR and GBP and some fleeing for defensive havens sending gold soaring.

Continuing on from yesterday's selloff in North America, overseas markets have been plunging overnight with the Nikkei and FTSE falling 1.3% and the Dax dropping 0.9%. US index futures continue to fall ‎dropping another 0.5% this morning. 

Talk of impeachment in the past has been terrible for markets. The Watergate scandal that led to the resignation of President Nixon coincided with the 1973-74 Grandaddy Bear Market. Also, the 1998 mini bear market that saw the S&P lose 15% in three weeks occurred in the middle of the Lewinsky scandal and attempt to impeach President Clinton.

It remains to be seen how long the Russia investigation may continue as a big story. President Trump is heading out on the road to Saudi Arabia, Israel and Italy plus a G7 summit which may shift focus elsewhere. On the other hand, Comey has been invited to testify to Congress next week. Even if this somehow manages to blow over, it's still a prelude to the big budget battle looming for September that could lead to a government shutdown. 

With a potentially volatile summer looming ahead, markets remain active, creating trading opportunities. A strong UK retail sales report, Falling US Dollar and more polls giving Conservatives a huge lead with their party manifesto now out has ignited a big rally in GBP today, sending Cable back above $1.3000. JPY and ‎gold continue to climb, while EUR has dropped back slightly after a rally. 

CAD continues to struggle, still underperforming the weak greenback. A 1.8% drop in oil prices is dragging on the loonie. The possibility that President Trump could try to score a win in trade talks against Canada and Mexico to distract from his problems at home may also be having a negative impact on CAD. 


Corporate News

Wal-Mart         $1.00 vs street $0.97 

Cisco Systems         $0.60 vs street $0.58


Economic News

Significant announcements released overnight include:

UK retail sales            4.0% vs street 2.1% vs previous 1.7%
UK retail ex auto        4.5% vs street 2.6%

Japan GDP annualized        2.2% vs street 1.7% vs previous 1.2%
Japan GDP deflator        (0.8%) vs street (0.7%) vs previous (0.1%) 

Australia employment change    37K vs street 5K vs previous 61K
Australia full time jobs        (12K) vs previous 75K
Australia part-time jobs        49K vs previous (14K) 
Australia unemployment rate    5.7% vs street 5.9%


Upcoming significant economic announcements include:

8:30 am EDT        US jobless claims        street 240K
8:30 am EDT        US Philadelphia Fed        street 18.5

10:00 am EDT        US leading index        street 0.4%
10:30 am EDT        US natural gas            street 60 BCF

1:00 pm EDT        ECB Draghi speaking
1:15 pm EDT        FOMC Mester speaking


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Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.