Stocks struggle as Trump offers few policy details
SINGAPORE: US stock futures pared gains on Wednesday on disappointment that President Donald Trump did not offer further details on his plans for infrastructure spending and tax reforms, but the dollar firmed on growing expectations of a rate hike this month.
Trump pledged to overhaul the immigration system, improve jobs and wages for Americans and promised “massive” tax relief to the middle class and tax cuts for companies, but offered few clues on how they would be achieved.
“Investors had little to grasp, and market reaction during the speech was choppy and directionless,” market strategists Paul Christopher, Scott Wren and Sameer Samana at Wells Fargo Investment Institute in St Louis said.
“The speech was short on details and did not even prioritize the president’s goals.”
Capital Economics’ Paul Ashworth said Trump was struggling to implement his agenda.
“With Congress getting bogged down by Republican infighting over efforts to repeal and replace existing healthcare legislation, it will take considerably longer to pass tax reform than we initially thought on election night,” Ashworth said in a note.
“There is now a good chance that it won’t happen until early next year.”
US stock futures still pointed to a higher open after Trump’s address, though gains shrank as the speech progressed.
E-mini S&P futures edged up 0.2 per cent, after the Dow Jones Industrial Average snapped a 12-day winning streak to close down 0.1 per cent in the prior session.
The dollar index, which tracks the greenback against a basket of tradeweighted peers, advanced almost 0.4 per cent to 101.49 after wobbling during the speech.
The US currency also rebounded against the yen, rising 0.35 per cent to 113.16 yen, after earlier erasing its gains.
Reaction in Asian stock markets to Trump’s speech was also largely muted, with the MSCI’s broadest index of Asia-Pacific shares outside Japan down about 0.2 per cent.
A raft of surveys pointing to stronger factory activity in China, Japan and other parts of the region were largely overshadowed by Trump’s speech.
“The market has been looking for reassurance that Trump intends to follow through on his campaign promises for fiscal spending, tax cuts and deregulation,” said James Woods, global investment analyst at Rivkin in Sydney.
“He mentioned these policies but did not provide any actual details or time lines, which is what investors are looking for.” “However, in particular I think his rhetoric has been toned down around protectionism when mentioning China and Mexico easing concerns around trade wars.”
Markets took note of that shift, with the Mexican peso trading higher after Trump’s speech.
While still pledging to build a wall on the US’s border with Mexico, Trump made no mention of his earlier promises to make the latter pay for it.
The dollar fell 0.1 per cent to 20.0815 pesos.
In Asian markets, Chinese stocks advanced 0.4 per cent after the stronger-than expected factory readings.
Japan’s Nikkei jumped 1.1 per cent, buoyed by a weaker yen.