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The week after the US elections

The exuberance of a Trumponomics-led rally have taken somewhat of a breather on Friday. 

Trading
Source: Bloomberg

As we enter the new week, the post-election sentiment is expected to subside. Economic indicators could return to the foreground in guiding market actions. Nevertheless, jolts of market reaction will not be ruled out, should we glean more from the Trump’s transition team.

Fickle, are our minds, volatile, are our markets. The S&P 500 index ended Friday down 0.14% with the energy and healthcare sectors leading losses, both of which clocked gains in the two sessions post-elections. The heavily hit information technology sector has also retraced some of the losses on Friday to gain 0.47%, though this was not enough to bring the headline index higher. While the stock market action on Wednesday and Thursday had been riding on the sentiment with regards to Trumponomics, Friday likely served as a reality check for markets. This is especially so given the President-elect’s relatively moderate stance post-elections. Nevertheless, with the landmark TPP deal likely shoved off the table at the moment, Asian markets are unlikely to receive much reprieve at the start of the week.

Separately, Oil - US Crude prices took another hit as Iran ramped up output, challenging the OPEC’s efforts to limit production. At 250,000 barrels a day, output from Iran had accelerated faster than expected. WTI futures plummeted approximately 0.4% on Friday and was last seen on either side of $43.50/bbl. A year ago, the market had been projecting a pickup in crude oil prices in the second half of 2016. A year later, we are still fluctuating around similar price levels, with all hopes pinned on the upcoming OPEC meeting. With the US’ potential pro-drilling stance to set in as well, the possibility of re-staging January’s lows have again resurfaced.

 

Japan’s Q3 GDP

Separately, Japan’s Q3 GDP arrived early morning and surprised on the upside at 0.5% QoQ. This is above the market consensus and previous reading of 0.2% QoQ. While the market had largely been expecting a flat reading, the latest reading certainly injected a boost of optimism for the markets. The Nikkei was seen a tad higher at the open. On the other hand, the JPY slipped with USD/JPY breaking above $107.00 this morning, triggering stops above. This comes as Japan's economy minister highlighted risks from China and emerging economies that could give rise to a more moderate recovery for the country.

With the weak leads, Asian markets could continue to see some downward pressure at the start of the week. China’s industrial production and retail sales will be due in the morning, though we are not expecting much surprise from this installation. 

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