The stock market looks likely to hold the line as investors wait on President Trump’s speech before Congress .
Bond and currency markets have already adjusted for more moderate expectations on the timing and extent of the Trump Administration’s fiscal stimulus. Australian stock markets will probably be cautious about selling further prior to the speech given the adjustment that’s already occurred.
The US 10 year note chart, neatly hit trading range resistance on Friday. A move lower tonight would confirm the 5th rejection of this trading range boundary. Text book behaviour now would be for price to drop (yield to rise) with a break below support. However, a break above this resistance could see an ongoing price rally with yields potentially retreating to 2.15/2.05%
As far as US tax policy is concerned, markets understand that it’s likely to be several months at least before an agreed position on the detail of tax reform can be achieved. Tomorrow's speech seems unlikely to provide much certainty on that front. However, traders may be looking for more detail on infrastructure and other spending initiatives.
The major mining stocks finished above their lows yesterday after several days of concerted profit taking. Yesterday’s turnaround, together with the higher spot iron ore price suggests the materials sector will steady today, helping the ASX 200 to stabilize above short term support near 5700 today
The $A may be sensitive to unexpected results in today’s current account data. The big turnaround in Australia’s trade performance together with low interest rates is expected to drive a major improvement in the current account which is an important consideration for currency valuations. Markets will also be sensitive to net export volume data which is anticipated to be a positive for tomorrow’s GDP figure.
CMC Markets is an execution-only service provider. 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.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.