The markets have been bouyed by US President Trump’s overnight Congressional address offering a less divisive and more optimistic outlook to his inauguration speech. While typically long on rhetoric, and perhaps lacking the policy detail markets craved, he offered just enough to keep bulls happy by reiterating pledges for $1bn infrastructure spend and $54bn defence boost.
Accendo Markets Analyst, Mike Van Dulken commented – ““Equities are embracing a more Presidential Trump whose congressional address offered just enough to rekindle bullishness (infrastructure + defence spend, tax breaks) even if detail was distinctly lacking. Then again markets move more on hopes and fears than confirmation and facts. Hence the old adage, “buy the rumour, sell the fact”.
Sentiment was buoyed further by hawkish comment from the Fed’s Dudley talking up a March rate hike, sending USD higher and both GBP and EUR lower to boost optimism in the FTSE and DAX. Add to this solid China PMI Manufacturing and an Aussie GDP beat and metals prices are higher despite dollar strength.
This renewed optimism meant that the FTSE could finally re-cross 7300 after the bell, jumping 0.3% this morning. That optimism will be tested, however, by some UK data this morning, namely the latest manufacturing PMI.
Spreadex Analyst, Connor Campbell noted – “Analysts are forecasting the figure to dip from 55.9 to 55.7 month-on-month, reflecting the slight slowdown expected in the first quarter; it must be said, though, that these estimates have had a tendency to be way off base since Brexit last year.”
Over in the Eurozone things were even perkier, the DAX and CAC climbing 0.9% and 0.8% respectively. Part of that will be down to the significant losses posted by the euro, which dropped 0.6% against the dollar and 0.3% against the pound. It will also be thanks to the prospect of some solid manufacturing data, with the region-wide reading set to be confirmed at 55.5, its highest point in nearly a decade.
In focus today
In focus today will be a range of European Manufacturing PMI readings, while this afternoon, US Personal Income and Spending will likely be closely scrutinised by the US Federal Reserve as its speakers become more hawkish.
Mike Van Dulken commented – “German Manufacturing PMI is seen improving, while its French equivalent pulls back, meaning the headline Eurozone reading will likely be unchanged. Also of note, German Unemployment is seen unchanged while its CPI reading may break above the ECB’s 2% self-imposed inflation target for the first time since 2013.”
The Canadian Dollar may get some attention today in light of the Bank of Canada rate decision. Since their last meeting, the performance of the Canadian economy has been mixed so all bets are off at this time. Market participants will be focusing on the rhetoric from the BoC policymakers;
ADS Securities Analyst, Konstantinos Anthis commented – “if they avoid to mention the possibility of lowering rates the USD/CAD will fall but if rate cuts are mentioned again then the currency pair will extend its recent gains.”
On the corporate releases’ agenda, technology products and solutions provider Best Buy Co. are expected to release their quarterly earnings today. Analysts expect the recent progress in US consumer demand to translate into a positive round of figures for the company.