Softer dollar, resilient markets post Trump conference

Financial markets have soared and optimism has risen, but we may be seeing the dawn of the Trump-inspired volatility, a symptom expected pre-elections. 

Currency
Source: Bloomberg

The highly anticipated “general news conference” unfolded overnight with the dollar ending the day softer and the US indices declining initially, though the latter later recovered from the initial damage. Anticipation had built up ahead of the conference with the dollar index surging from 102.00 levels to a high of 102.95 as the market held their breath for insights into the President-elect’s economic plans. However, the apparent lack of these mentions saw the dollar index, measured against six major currencies, free falling more than 150 pips to sub-101.40 levels before recovering slightly to trade on either side of 101.80 into Asia morning.

For Asian currencies, that would mean another day without the aggravated outflow pressures, likely a pleasant development for the Chinese authorities which has moved into Bitcoin in their latest fight against capital outflows. The $21 billion pot, a relatively insignificant amount compared to the level of decline for foreign reserves, have caught the attention of the authorities at the start of the year.

On Wednesday, it was reported that the Chinese central bank had conducted spot checks on leading bitcoin exchanges, sending prices down more than 13%. The Chinese currency is likely to see another day of moderated moves with the softer dollar, though the same is unlikely to apply in the medium to longer term.

On equities, the rehashing of drug prices by President-elect Donald Trump had once again taken a shot at the healthcare sector which ended Wednesday as the worst performing sector, down 1.04% on the S&P 500. This is old news for the market, but the reaction appear to be an indication that the market is still discounting the impact the US that is “going to start bidding” in reference to more competitive bidding practices.

The energy sector had meanwhile recovered to lead gains at 1.20% after declining in the first two sessions of the week and brought the S&P 500 to a close of +0.28%. Overnight, crude oil prices had risen, once again with news by the US suggesting that refiners had processed record levels of crude in the previous week.

Early movers in Asia are still riding on the recent positive momentum with KOSPI in moderate black and the MSCI Singapore free surging 0.6% shortly after the open. There could be little to dampen the markets today with attention to focus ahead to China’s December trade, US retail sales and major bank earnings, all due on Friday.

Yesterday: S&P 500 +0.28%; DJIA +0.50%; DAX +0.54%; FTSE +0.21%

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