Global stocks flat as fo­cus slowly shifts from Trump

Kuwait Times - - BUSINESS -

Global stock mar­kets traded in fairly nar­row ranges yes­ter­day as in­vestors slowly turned their fo­cus away from what Pres­i­den­t­elect Don­ald Trump will do in of­fice to more fun­da­men­tal driv­ers, such as whether the Fed­eral Re­serve will raise in­ter­est rates next month.

In Europe, Bri­tain’s FTSE 100 in­dex of lead­ing Bri­tish shares was up 0.6 per­cent at 6,791 while Ger­many’s DAX fell 0.1 per­cent to 10,687. The CAC-40 in France was 0.2 per­cent higher at 4,517. U.S. stocks were poised for a steady open­ing, with Dow fu­tures and the broader S&P 500 fu­tures down 0.1 per­cent.

The fo­cus in mar­kets in the past few ses­sions has been on the up­com­ing Trump pres­i­dency, which will be­gin on Jan 20. An­a­lysts say his prom­ises of tax cuts and higher in­fra­struc­ture spend­ing could boost eco­nomic growth but also spur in­fla­tion. That’s seen a rally in stocks, a sell­off of US bond yields and a con­cur­rent rise in the dol­lar. His threats of sanc­tions against China and other trad­ing part­ners that he ac­cuses of act­ing un­fairly have rat­tled trade-de­pen­dent Asian economies, in par­tic­u­lar.

Yes­ter­day, at­ten­tion was turn­ing onto other fac­tors. Any short­fall from the an­tic­i­pated 0.6 per­cent monthly rise in re­tail sec­tor could jolt con­fi­dence over the state of the US econ­omy go­ing into the tran­si­tion pe­riod from one pres­i­dent to another. Whether it will dent spec­u­la­tion of an in­ter­est rate in­crease from the Fed­eral Re­serve in De­cem­ber is another mat­ter. Com­ments from a raft of Fed pol­i­cy­mak­ers, in­clud­ing Vice Chair Stan­ley Fis­cher, will be di­gested in that con­text.

“For what feels like the first time in a long time, fun­da­men­tals get a look in to­day af­ter the over­rid­ing dom­i­nance of po­lit­i­cal mar­kets driv­ers,” said Fiona Cin­cotta, mar­ket an­a­lyst at City In­dex. That fo­cus on more fun­da­men­tal fac­tors ap­peared to be im­pact­ing on cur­rency mar­kets, too. The dol­lar, which has been one of the main ben­e­fi­cia­ries from Trump’s vic­tory last week, was rel­a­tively flat. The euro was un­changed at $1.0767 while the dol­lar rose 0.4 per­cent to 108.27 yen. “Risks are el­e­vated, and we are ex­pect­ing fur­ther in­creases in volatil­ity as mar­kets at­tempt to sec­ond-guess the poli­cies that might even­tu­ally come out from the US,” Michael McCarthy, chief mar­ket strate­gist at CMC Mar­kets in Syd­ney, told Bloomberg News.

Fed in fo­cus

The dol­lar dipped back from a five­month high of 108.54 yen, but traders sug­gested it could test the 110 yen mark as soon as this week, with eyes on Fed chief Janet Yellen’s con­gres­sional tes­ti­mony later this week. The cen­tral bank is widely ex­pected to hike bor­row­ing costs next month but her re­marks Thurs­day will be pored over for clues about its plans for next year. “By all ac­counts, there ap­pears no stop­ping the US dol­lar’s re­cent as­cent based on the cur­rent in­ter­est rate tra­jec­tory,” Stephen Innes, se­nior trader at OANDA, said in a note. And Takuya Kanda, a se­nior re­searcher at Gaitame.com Re­search In­sti­tute said: “The dol­lar is cur­rently ral­ly­ing on ex­pec­ta­tions only. But the poli­cies Trump has called for are all dol­lar-pos­i­tive. Af­ter paus­ing around 107 to 108, the dol­lar will re­sume its up­trend to­ward 110 yen by year-end.”

Asian emerg­ing mar­kets up

Most Asian emerg­ing mar­kets rose yes­ter­day af­ter the pre­vi­ous day’s heavy losses while the dol­lar dipped against most peers but traders re­mained on edge over Don­ald Trump’s plans for global trade agree­ments. While shares in de­vel­oped economies have ral­lied and safe-haven sov­er­eign debt prices have fallen, many trad­ing floors in Asia have taken a hit re­cently over wor­ries Trump will throw up tar­iffs to the world’s big­gest econ­omy. His plans for huge spend­ing and tax cuts at home have also fanned ex­pec­ta­tions the Fed­eral Re­serve will hike in­ter­est rates more sharply than ini­tially planned, send­ing the dol­lar soar­ing and fu­elling an ex­o­dus from emerg­ing mar­kets.

How­ever, af­ter a two-day re­treat on most re­gional bourses, there was a ten­ta­tive re­cov­ery with Manila up 0.3 per­cent, Jakarta 0.5 per­cent higher and Bangkok added 0.2 per­cent.

There were also gains of 0.7 per­cent in Sin­ga­pore and a 0.5 per­cent rise in Welling­ton while Hong Kong gained 0.5 per­cent. How­ever, Tokyo was marginally lower, hav­ing surged more than eight per­cent to a nine-month high since Thurs­day on the back of a rally in the dol­lar against the yen. Shang­hai was off 0.1 per­cent, while Syd­ney and Seoul each shed 0.4 per­cent. The dol­lar sank against higher-yield­ing cur­ren­cies, with the South Korean won, Aus­tralian dol­lar, Thai baht and New Zealand dol­lar all well up. The euro rose af­ter hit­ting an 11-month low of $1.0709 on Mon­day.

And Mex­ico’s peso was two per­cent higher, hav­ing hit record lows this week on wor­ries about Trump’s warn­ing he will tear up a trade deal with the coun­try and send back mil­lions of mi­grants.

How­ever, China weak­ened its yuan fix to the dol­lar to an eight-year low. Bets on a sharper rise in US rates have sent bond yields soar­ing in the US and Aus­tralia as traders shift out of them be­cause sov­er­eign debt usu­ally of­fers lower rates of in­ter­est. Prices and yields move in­versely from each other. Aus­tralian debt yields are at their high­est since April, according to Bloomberg News. — Agencies

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