Trump fails to cheer markets
Global equity and currency trading made an aboutturn on Thursday following president-elect Donald Trump’s disappointing news conference. Confounding expectations, the dollar weakened and US treasury yields firmed. In response, the rand rose 30c to R13,4107/$, surprising traders on the upside.
Global equity and currency trading made an about-turn on Thursday after US presidentelect Donald Trump’s disappointing news conference.
Confounding expectations, the dollar weakened and US Treasury yields firmed. The rand responded by strengthening 30c to R13,4107/$, surprising traders on the upside.
Trump made little reference to economic policies, preferring to lambast the media and accusing intelligence agencies of spreading unverified reports.
Trump spent more time focusing on the wall and Mexico than his business-friendly economic policies, said Rand Merchant Bank analyst John Cairns.
Markets disliked the speech, with US Treasury yields falling on safe-haven flows. “However, equity markets actually managed to end up — the Dow moved back towards the key psychological 20,000 level.”
The dollar has trended firmer since Trump’s election win on November 8, with the Dow Jones soaring and US Treasury yields weakening, but it now seems doubtful that it will continue. The benchmark US 10year bond has failed to weaken further from 2.60% and the dollar has failed to break through the $1 level against the euro.
The US 10-year (bond) has gained 5.3% in yield so far this year, confounding analysts’ forecasts that yields could spike to 3%. The euro has gained 1.28% against the dollar so far this year, with the yen and sterling also recording gains against the greenback on Thursday.
Oanda analyst Craig Erlam said Trump’s press conference was not what investors wanted to hear. “Talk of protectionism and more company bashing was not exactly market friendly,” Erlam said.
Trump’s reticence to provide further detail about his economic policies have led analysts to believe promises of strong tax cuts and an expansionary fiscal policy he had made as candidate may be exaggerated.
The lack of cohesive policy comment from the presidentelect partially undermined the “fiscal and stimulus” narrative that had been associated with a Trump administration, Momentum SP Reid analysts said.
Markets are now pricing in only two interest-rate increases by the US Federal Reserve this year. At the end of last year, chairwoman Janet Yellen signalled three, with recent strong wage growth data in the US leading some analysts to predict even four rate increases.
The new scenario, if it continued, would be beneficial for the rand and the JSE. The all share is up 3.54% this year. The Dow Jones has gained 1% following its 13.42% jump in 2016.
Global markets and the dollar reacted negatively to US president-elect Donald Trump’s first media briefing on Wednesday evening at which he was expected to outline his policy for growing the US economy.
Instead, he harped on about building a wall between the US and Mexico, trade between the two countries and getting rid of the Affordable Care Act, commonly referred to as Obamacare. He also managed to squabble with reporters, refusing to answer questions from one of them.
The result was a drop in equity markets and the dollar on Thursday, while the gold price rose, breaking through the resistance level of $1,200 an ounce.
The JSE closed flat as a stronger performance from miners was offset by a sharp pull-back in heavyweight Naspers. Naspers, which has a 34% investment in China’s Tencent, was pulled down by a drop in the latter’s share price in Hong Kong.
The all share closed 0.01% higher at 52,444.40 points in choppy trade, after firming 0.43% by midday. The top 40 shed 0.06%. The gold index added 3.14%, platinums 0.85% and resources 0.87%. Industrials fell 0.34%.
The Dow Jones was 0.59% weaker at the JSE’s close, while European markets also lost ground.
Among individual shares Anglo American gained 1.42% to R219.62. BHP Billiton fell 0.52% to R238.43. Anglo-Gold Ashanti jumped 4.28% to R163.85 and Sibanye 2.38% to R27.50. Anglo American Platinum added 3.29% to R307.
Woolworths was lifted 1.18% to R66 after saying sales for the first 26 weeks of the financial year rose 6.7% from the previous corresponding period.
The rand firmed in evening trade as the dollar weakened. At 6.36pm, it was at R13.4824/$ from R13.7327. Bonds firmed on the stronger rand.
Futures ended flat in response to global markets. The local near-dated top 40 Alsi futures index lost 0.01% to 46,200 points, with 35,184 contracts traded compared with 45,493 on Wednesday.