The big day everyone has been eagerly awaiting (or dreading) for over two months since the US election is finally here. Today Donald Trump is to be sworn in as US President and to give a speech outlining his vision for the country. There will also be other festivities and protests running into the weekend.
The official start to the Trump Administration brings some trepidation to the markets. The big post-election rally priced in huge expectations that his policies would benefit the US economy with little blowback or opposition. Today and Monday, his first full weekday in the Oval Office, the rubber hits the road.
Today's inaugural address may give traders a better idea of what measures he is planning to fix the economy (changes to trade, infrastructure, regulations, taxation and heath care were widely discussed in the campaign), and where the economy sits on his list of priorities. It's important for traders to note that along with new initiatives, he's going to need to spend time cleaning up the messes that President Obama has left behind. In addition to the speech, incoming President Trump is expected to issue a number of executive orders related to deregulation, and potentially building a wall on the Mexican border.
So far this morning, US index futures, the FTSE and the Dax are all up slightly 0.0% to 0.2%. Overnight IBM beat the street on earnings and guidance but there was little impact indicating strong results have already been priced in, shifting the balance of surprises to the downside.
Gold is flat while USD is up slightly against other major currencies. Fed Chair Yellen indicated more rate hikes are likely, but she also noted the US isn't overheating so she probably won't be as aggressively hawkish as the street is thinking. Earlier in the week she hinted toward 2 rate hikes, the Fed party line is 3 and the street has priced 4-5 into the US Dollar.
GBP has dropped back moderately on lower than expected but still pretty good UK retail sales report. (there are a LOT of countries that would love to post 4%+ retail sales).
Despite a 1.1% gain in the WTI oil price overnight. The Canadian Dollar remains under pressure and could be active through the day. Canada inflation and retail sales reports are due but are likely to be overshadowed by events south of the border. With the US looking to reopen NAFTA and bring in other trade measures, even though Canada is unlikely to be targeted directly, we could get caught in the crossfire of trade wars. Because of this risk, the Bank of Canada moved dovish this week indicating it stands ready to cut interest rates if needed to mitigate any impact of changing trade. Any comments or actions from Trump on trade today could have a big impact on both CAD and the Mexican Peso (MXN).
The banking situation in China may also impact trading in the coming days. Overnight, China GDP came in at 6.8% just above expectations. Meanwhile, the PBOC has been rushing to shore up the country's banking system ahead of next weekend's Lunar New Year holiday. In addition to pumping in record amounts of liquidity, the PBOC cut the reserve requirements for major banks freeing up capital form them to put into the system as well. The Hang Seng fell while mainland markets rose, but this China could become a bigger issue next week particularly if the US starts taking action against it over trade or currency issues.
IBM $5.01 vs street $4.88, F2017 operating EPS guidance $13.80 above street $13.74
American Express $0.91 vs street $0.99
Procter & Gamble $1.08 vs street $1.06
China Q4 GDP 6.8% vs street 6.7%
China industrial production 6.0% vs street 6.1%
China retail sales 10.9% vs street 10.7%
UK retail sales 4.3% vs street 7.2% vs previous 5.9%
UK retail ex auto 4.9% vs street 7.5% vs previous 6.6%
Upcoming significant economic announcements include:
8:30 am EST Canada consumer prices street 1 7% vs previous 1.2%
8:30 am EST Canada core CPI common previous 1.3%
8:30 am EST Canada retail sales street 0.5% vs previous 1.1%
8:30 am EST Canada retail ex auto street 0.0% vs previous 1.4%
12:00 pm EST Donald Trump Oath of Office and Inaugural Address
9:00 am EST FOMC Harker speaking
1:00 pm EST FOMC Williams speaking
1:00 pm EST US Baker Hughes drill rig count previous 659 vs yr previous664
year ago this week 650