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The market price for President Trump

It may be a game of brinkmanship being played in US politics, and questions are being raised by the trading community about the fallout of immigration policy into the markets, and businesses assessing the damage of the reduced numbers of overseas students though the US education system.

US
Source: Bloomberg

US-listed companies are working through the potential disruption to supply chains if tariffs become a serious cost factor in 2017, keeping in mind these are tariffs that the American public will ultimately pay for.

There’s gathering momentum in Mexico to have the whole NAFTA agreement torn up. Markets dislike uncertainty so the result is a lack of commitment for higher prices. With three trading sessions moving the markets lower, the DOW 30 and S&P 500 are now trading back into the lower part of the December/January range of 19800 for the Dow and 2270 for the S&P, so no real technical damage has been done to the market averages at this stage.

If inflation is good, then the overnight CPI read of +0.2% from Germany at 1.9% (expectation was 2%) has left the Euro bourses mixed, with DAX down 1.2% and the FSTE 250 65 points higher. The UK parliament is now going into two days of debate to give Prime Minister Theresa May the authority to trigger Article 50 to exit the UK out of the Euro zone pact. The European Union’s chief Brexit negotiator, Guy Verhofstadt, has also suggested Trump is part of a three-pronged attack on the European Union. The EUR/USD pushed over 1.08 as Trump again infers countries are taking advantage of the US by lowering the exchange rates.

The Australian SPI futures contract up nine points as the market comes into the morning close, suggesting the bears have not wrested control from the bulls. Traders often refer to this as the shakeout, as the retest of recent lows can be the catalyst for pushing to new highs.

Copper made a new high at $2.72lb overnight in line with stronger inflation numbers from the Euro region, but no leads from the iron ore markets closed for Lunar New Year.

We are looking for a positive open with the ADR for BHP pricing at $27.15 up from yesterday’s close of $26.64 - a gain of 2%. Further gains in gold at 1220oz has the ADR for Newcrest at $22.05 up 2.5% from yesterday’s close. CBA’s overnight ADR is also a little higher at $81.82, up from yesterday’s close of $81.66.

A stronger AUD/USD currently at 0.7580 testing old resistance highs of 0.7600 overnight may temper the bullishness today, but a positive day is still expected.

As the US markets move back into the consolidation areas, our Aussie 200 has also moved to the lower support level of 5600 yesterday. This is where the resolve of bullish traders is tested as a breakdown from this level would bring in a primary down trend. Our relative strength remains below the key “50” level, however, not oversold.

The Australian VIX has moved higher overnight to 13.9. While not at a level to be concerned about, it is up 7% overnight and 33% higher from the December lows.

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