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8@eight: Trump trade resurfaces


President Donald Trump’s win on healthcare reforms is reviving hopes of his capacity to deliver..

1. House win

Incredibly, US house republicans have approved the legislation to replace the Affordable care act, this will be the first real victory for President Trump and House Speaker Paul Ryan. For seven years the Republicans have promised to replace Obamacare and it seems this may actually happen, although it won’t likely pass through the Senate in its current guise.

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Will bank earnings drive the ASX 200 towards 6000?

With ANZ, NAB, MQG and WBC all reporting earnings in the days ahead, will the numbers and outlook breathe further life into a sector that is clearly outperforming. (This video was produced in commercial partnership between Fairfax Media and IG Markets).

“Trump the negotiator”‘, with his lifetime of business experience, is now dealing with a political process that has vastly different operational model. He has certainly looked out of his depth at times, but slowly things are shaping up.

2. Interest in tax

President Donald Trump President Donald Trump Photo: PABLO MARTINEZ MONSIVAIS

This development will interest the market participants greatly as the proposed tax cuts will now have a legitimate way of being funded (if passed in the Senate), and just in time as the whole process has been the Presidents Achilles heel since taking office. One very unflattering statistic shows President Trump has now made over 400 unsubstantiated claims in his mere three months as president, now with a growing disregard of the tweets and statements becoming just back ground noise.

3. Focus on earnings

The markets at this stage are far more focused on the super strong earnings growth that is being reported, justifying the current run up in the S&P 500, which last night settled at 2389 points. Although this is still below the all-time high of 2401 points set on the first of March this year. With the S&P500 trading within closing range of just seven points in the past eight trading sessions, so the market, it seems, may be waiting for the next catalyst to fuel the current bullish rally.

4. Labour improves

Overnight, we saw further information around the US labour market, with U.S. employers announcing plans in April to cut 36,602 jobs, this is a 15 per cent decrease from the planned layoff in March, according to outplacement consultancy Challenger, Gray & Christmas. This statistic, along with good numbers in this week’s ADP payrolls bode well for the non-farm payrolls number for April being reported tonight, which is expected to show a gain of 190K.

Importantly, the recent soft data patch we have seen in Q1 may suggest the market will be quite sensitive to a miss in this jobs report and a number below 140,000 may ultimately shake the confidence of the bulls in the short term.

5. Commodities dumped

In the Asian region commodities have again taken the lime light for all of the wrong reasons overnight with Brent falling to $US48.38 a barrel and West Texas intermediate contract moving to $45.46, -5 per cent. These levels have taken the commodity back to November levels where OPEC production cuts were agreed upon in November.

The S&P energy sector moved 1.9 per cent lower, and this will be reflected in the Australian equity market today as it appears bullish sentiment has been broken in a market that held a net long position in the commodity all the while expecting a further rally back to the OPEC target zone of $65 a barrel.

6. Weak local market

I would expect further weakness in the Australian market today, although the SPI futures are showing a modest open down 7 points. Iron ore moved five per cent lower yesterday in Asian trade, with iron ore futures also smashed in overnight trade and this has reflected in US-listed Vale trading 4.9 per cent lower.

While the Australian bulk producers FMG along with BHP and RIO were marked down yesterday, American depository receipts (ADR), have BHP opening down a further 1.8 per cent in today’s market.

7. Benchmark fading

It seems the much talked about 6000 point target for the Aussie 200 may again be a bridge to far, this week’s bank reporting has come in line with expectations and the recent rally has seen significant profit taking with ANZ moving back to the $30 level last seen mid-February.Macquarie are reporting today

8. Market watch:

SPI futures down 8 points or 0.1% to 5856

AUD -0.1% to 74.11 US cents (Overnight range: 73.83 – 74.30)

On Wall St, Dow flat, S&P 500 +0.1%, Nasdaq +0.1%

In New York, BHP -1.1%, Rio -0.8%

In Europe, Stoxx 50 +1.2%, FTSE +0.2%, CAC +1.4%, DAX +1%

Spot gold -0.8% to $US1227.82 an ounce

Brent crude -4.9% to $US48.32 a barrel

US oil -5% to $US45.41 a barrel

Iron ore -5.1% to $US65.20 a tonne

Dalian iron ore -5.6% to 471 yuan

Steam coal +0.0% to $US78.00, Met coal -2.5% to $US175.50

LME aluminium -0.6% to $US1913 a tonne

LME copper -1% to $US5543 a tonne

10-year bond yield: US 2.35%; Germany 0.39%; Australia 2.64%

DescriptionThis column was produced in commercial partnership between Fairfax Media and IG

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