Stock markets diverge, all eyes on Trump
World stock markets diverged yesterday, as a recent Trump-inspired rally showed signs of fragility. A record 11th successive all-time high close for New York’s Dow on Friday came as investors nevertheless are growing worried that the recent buying-fuelled by expectations that US President Donald Trump will introduce economy-boosting measures-may have gone too far. Asian markets kicked the week off with losses, with Tokyo hit by a stronger yen, as the global Trump rally shows signs of fragility before a key speech by the new president to Congress.
Treasury Secretary Steven Mnuchin’s warning that growth might not hit the four percent Trump promised, as well as uncertainty around the new president’s plans to slash taxes and spend big on infrastructure, sent the dollar tumbling at the end of last week, before recovering ground yesterday.
“The markets are continuing to find a way to squeeze out new highs and post small gains on a daily basis, a large portion of which appears to be attributable to the apparently substantial but as yet unknown stimulus measures from the Trump administration,” said Craig Erlam, senior market analyst at Oanda trading group.
Elsewhere, the London Stock Exchange on Sunday said it is “highly unlikely” it will be able to meet antitrust conditions set by Brussels for its tie-up with Deutsche Boerse, throwing the merger into doubt. The announcement by LSE, which also operates the Milan stock exchange, is the latest twist in its longstanding attempt to merge with the German stock exchange operator. The LSE said it had examined the European Commission’s request to divest its majority stake in Italian trading unit MTS, concluding it could not commit to such a request.
LSE and Deutsche Boerse were both trading down 2.6 percent around the half-way mark in Monday’s European trading, “as it becomes clear that the merger... is on a knife-edge”, noted Neil Wilson, senior market analyst at ETX Capital.
“The regulatory hurdles were always a risk and with Brexit there are additional hurdles to clear that seem close to insurmountable now,” he added.
‘Fraying at the edges’
Despite yesterday’s focus on the LSE, “this week it’s really about President Trump, his address to a joint sitting of Congress and his tax plan”, said Greg McKenna, chief market strategist at AxiTrader. “I get a sense traders want to believe in him-hence the stocks rally-but (with haven investment) gold up and rates down suggest there is some fraying at the edges of market ebullience.” Markets are hoping the speech today will provide more details about Trump’s tax pledge, which he said this month would be “phenomenal”. Europe’s benchmark index of leading 300 shares fell 0.2 percent to 1,456 points, led lower by insurers and exchange operators. Assicurazioni Generali fell 3.7 percent after bank Intesa Sanpaolo said late on Friday it had decided not to pursue a possible tie-up with Italy’s biggest insurer. Meanwhile, the proposed 29 billion euro merger between the London Stock Exchange and Deutsche Boerse to create Europe’s biggest stock exchange looked dead in the water due an inability to meet European antitrust demands. Shares in both companies fell by as much as 3 percent on yesterday. MSCI’s benchmark world stock index slipped 0.2 percent , on course for its first consecutive daily fall for three weeks. On Thursday, it hit a record high of 447.67 points. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 percent, near the day’s lows, while Japan’s Nikkei closed 0.9 percent lower at a 2-1/2 week low on concerns that a stronger yen would crimp corporate earnings.
In bond markets, the focus was on France, where the latest polls showed that centrist Emmanuel Macron would score a more convincing victory over far-right and anti-euro Marine Le Pen in the presidential election’s runoff vote. — Agencies