Questions are being raised by the trading community about the fallout of Donald Trump's controversial immigration policy into the markets.
1. The Trump effect: Business is accessing the damage of reduced numbers of overseas students though the US education system. US listed companies are working thru the potential disruption to supply chains if tariffs become a serious cost factor in 2017, keeping in mind these are the tariffs that the American public will ultimately pay for.
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Gathering momentum in Mexico to have the whole NAFTA agreement torn up, markets dislike uncertainty so the result is a lack of commitment for higher prices.
2. Wall Street: With three trading sessions moving the markets lower. The DOW30 and the S&P; now trading back into the lower part of the December January range 19800 for the Dow and 2270 for the S&P; so no real technical damage has been done to the market averages at this stage.
3. Inflation talk: If inflation is good, then overnight CPI read, +0.2 per cent from Germany at 1.9 per cent expectation was 2 per cent this has left the Euro bourses mixed, Germany down 1.2 per cent and the FSTE250 65 points higher, while the UK parliament goes into 2 days of debate to give Prime Minister Theresa May the authority to trigger article 50 to exit the UK out of the Euro zone pact. The European union's chief BREXIT negotiator Guy Verhofstadt has also suggested Trump is part of a three pronged attack on the European Union.
4. Currencies: A stronger AUDUSD currently .7580 tested old resistance highs of .7600 overnight may temper the bullishness today, still a positive day is expected. The EURUSD pushed over 1.08 as Trump again infers countries are taking advantage of the US by lowering the exchange rates.
5. ASX: With the Australian SPI futures contract is up 9 points, as the market comes into the morning close, this really does suggest the bears have not wrested control from the bulls. Traders often refer to this as the shakeout, as the retest of recent lows can be the catalyst for pushing to new highs. As the US markets move back into the consolidation area's our Aussie 200 has also moved to the lower support level of 5600 yesterday. This is where the resolve of bullish traders is tested as a breakdown from this level would bring in a primary down trend. Our relative strength remains below the key "50" level however not oversold. CBA's overnight ADR also a little higher at $81.82 up from yesterdays close of $81.66.
6. Commodities: Copper made a new high at $2.72lb overnight in line with stronger inflation numbers from the Euro region, no leads coming from the Iron ore markets closed for Chinese Lunar new year. We are looking for a positive open with the ADR for BHP pricing at $27.15 up from yesterdays close of $26.64 a gain of 2 per cent. Further gains in Gold at 1220oz has the ADR for Newcrest at $22.05 up 2.5 per cent from yesterday's close
7. Volatility: The Australian VIX has moved higher overnight to 13.9, while not at a level to be concerned about it is up 7 per cent over night and 33 per cent higher from the December lows.
8. Market watch:
SPI futures up 13 points or 0.2% to 5568
AUD +0.5% to 75.86 US cents (overnight peak 76.06)
On Wall St, Dow -0.7%, S&P; 500 -0.4%, Nasdaq -0.3%
In New York, BHP +1.2%; Rio +0.4%
In Europe, Stoxx 50 -1%, FTSE -0.3%, CAC -0.8%, DAX -1.3%
Spot gold +1.3% to $US1211.59 an ounce
Brent crude +1.1% to $US55.81 a barrel
Iron ore flat at $US83.34 a tonne
LME aluminium +0.9% to $US1819
LME copper +2.9% to $US5989 a tonne
10-year bond yield: US 2.44%; Germany 0.43%; Australia 2.71%
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