Markets preparing for Trump’s inauguration

In the Federal Reserve (Fed) minutes released last night, it became clear the members have become more hawkish and have considered the possibility of quickening rate hikes with all members seeing upside risk in fiscal policy.

Source: Bloomberg

The committee also decided the overall federal funds rate has remained well within the Federal Open Market Committee’s (FOMC) target range. The market is pricing in a 34% chance of a rate hike in the March meeting.

Financing conditions for commercial real estate (CRE) also remained largely accommodative. The average rate of growth of CRE loans at banks continued to be strong in October and November. Spreads on commercial mortgage-backed securities narrowed a little over the intermeeting period, and issuance of such securities continued to outpace that of the first half of 2016.

The expectation for core inflation is 2% and interestingly the current global average for inflation is sitting at 3.7%, with Venezuela dealing with a whopping 180% inflation rate and at the other end of the scale is Bosnia Herzegovina with -1%.

US vehicle sales in the US popped at 18.29 million unit sales off the back of Ford deciding to extend their manufacturing facilities in the US. One of the beneficiaries of improving car sales is platinum, with the current price move looking to retest $1000/oz. Platinum is used in the catalytic exhaust system of vehicles. With China producing over three million vehicles, this only adds to the current demand.

With Trumponomics still influencing the expectation of better economic times ahead, markets remain poised below key levels, and the DOW is moving around under the key 20,000 point level. A good non-farm jobs number may be the catalyst to give traders the reason to remain long when the index makes that historic move.

The commodities space has recorded the first positive year in the past six years. Commodities are taking the cue from this expectation of coming inflation with volatility to the upside showing again last night. Oil moved back over $53/lb and copper  is at $2.55/lb, jumping back over the key $2.50 level.

We are expecting a positive open to the markets today with the SPI futures in early trade up 21 points. The BHP ADR shows an open of $25.55 which may be an opportunity as commodities have staged a strong night. The CBA ADR shows an open of $84.22 up from the last close of $83.61. Overall a good day expected in the Australian market.

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