This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Is the Trump effect in the equity markets finished?
Certainly the equity bulls are taking a rest after a surprisingly strong run after the US elections and hardly a committed sell in last night’s session. No real bears are to be seen as the US Trump roadshow announces a potential infrastructure bank to fund projects out of Trump's policy ideas. It seems all eyes remain on the Trump camp, with inflation rather than deflation predictions being the topic.
Bank of England governor Mark Carney targets 2% inflation rate for 2017 as a benchmark. On the back of Bank of Japan Governor Kuroda recently restating a 2% inflation target, the ten-year JGB yield moved back to zero from negative territory.
Currencies remain under pressure, with the Japanese yen remaining under the important 110 level last at 109.15. This should keep the Nikkei 225 supported above the 17,800 level going into the last trading days of the week. EUR/USD is at 1.067, its lowest since 2012, and continues to buckle under the US dollar pressure.
All of this is stemming from US dollar strength that keep the USD Index over the important 100 level.
We saw some across the board profit taking last night, with iron ore lower 0.36% and the West Texas contract down 0.6% - $45.54 coming into the close.
BHP’s ADR comes in at $23.85 with continued overnight weakness in iron ore and the easing back of oil. Our market should see some profit taking today, with an implied open around 5300 points down 26 from yesterdays close. Coking coal remains the standout commodity, up $1.46 overnight.
The Australian market remains a stock picker’s market in health care and technology sectors, while this current consolidation above 5300 remains.