t’s been a big day for trading amid a number of significant developments. The biggest development has been a strong flow of capital back out of defensive havens and into stocks. Traders appear to be gaining some comfort that the Trump Administration is working to make things better for US business and not just pursuing ideological goals.
In particular, the street has responded favourably to the news that President Trump signed orders enabling an expedited move toward approval of the Keystone XL and Dakota Access pipelines which had been delayed by political disputes and environmental protests. The orders set clear deadlines and demand the use of existing environmental assessments rather than demanding new ones. In exchange, the President is demanding that US pipeline projects be built using US steel. The administration also indicated it wants to accelerate the approval process for infrastructure projects in general.
The prospect for accelerated infrastructure demand sparked rallies in the industrials sector and in metals. Copper soared 2.4% sparking big gains for base metal stocks like Freeport which could carry through to trading in Australian miners today. The NASDAQ touched a new all-time high today indicating renewed interest in technology and momentum stocks, a sign of increased risk tolerance. Japanese stocks have been climbing again with the Yen retreating.
Today’s US developments also showed the President’s interest in working with Canada on common economic goals, rather than antagonizing its largest trading partner just to score political points with celebrities. This sparked a big rebound for the Loonie which had been depressed lately on concerns trade disputes could impact Canada.
The USD continued to retreat in reaction to comments from Treasury Secretary nominee Mnuchin recognizing that a high US dollar could have a negative impact on their economic recovery plans. He also indicated no plans to reform the Fed. Overall, this seems to indicate that there may not be as much political pressure on the Fed to raise interest rates as previously thought.
It has also been a big day for trading in Sterling, which started out soft but then rebounded dramatically. The UK Supreme Court ruled that a Parliamentary vote is needed to trigger Article 50 and Brexit was initially seen as a setback. The pound rebounded, however, as the ruling the government does not have to consult regional bodies (Scotland, Wales, Northern Ireland) and government comments that the Brexit bill would be short and simple indicated that this could be more of a speed bump that Brexit could be delayed but not derailed. Meanwhile, reports that Britain may soon start trade talks with China, Australia, the US and other potential trading partners remind the street that Britain is not going to be as isolated on Brexit as the EU would like people to think and that the opportunities of Brexit outweigh the risks.
The main focus of the next 24 hours remains on President Trump’s first week in office and corporate earnings with Boeing leading Wednesday’s slate. Japan trade figures, along with Australia inflation could attract some attention. US API crude oil inventories rose and DOE figures Wednesday could attract attention from traders increasingly concerned about the potential higher prices could bring US shut-in production back on stream particularly if pipeline projects start moving forward to ease bottlenecks.
Canadian National $1.23 vs street $1.21
Texas Instruments $0.88 vs street $0.81, guides Next Q to $0.78-$0.88 above street $0.75
Significant announcements released overnight include:
UK Supreme Court Decisions on Brexit:
Government must consult Parliament before triggering Article 50 8-3
Government does not have to consult devolved regions before triggering 11-0
US API Crude oil inventories 2.9 mmbbbls
US flash manufacturing PMI 55.1 vs street 54.5
US existing home sales 5.49M vs street 5.51M
US Richmond Fed 12 vs street 7
France flash manufacturing PMI 53.4 as expected
France flash service PMI 53.9 vs street 53.2
Germany flash manufacturing PMI 56.5 vs street 55.4
Germany flash service PMI 53.2 vs street 54.5
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
10:50 am AEDT Japan trade balance street ¥250B
10:50 am AEDT Japan exports street 1.2%
11:30 am AEDT Australia consumer prices street 1.6%
9:00 am GMT Germany IFO current street 116.9
9:00 am GMT Germany IFO sentiment street 111.2
9:00 am GMT Germany IFO expectations street 105.8
10:30 am EST US DOE crude oil inventories previous 2.3M
10:30 am EST US DOE gasoline inventories previous 5.9M
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