By Michael McKenna
Yesterday’s extremely strong Chinese PPI print saw a surge in metals prices that boosted Asian bourses today, with the Hang Seng index up for a 10th straight session. According to Saxo Bank head of commodities Ole Hansen, copper is surging while iron ore prices rose by 2.8% today following yesterday’s 5%-plus gain.
According to Singapore-based Saxo Bank trader Ryan Wu, China is responsible for three quarters of the world’s seaborne iron ore trade.
If today’s press conference (1100 EST) by famously outspoken US president-elect Donald Trump is not exactly a black swan, it remains at least a distinctly-coiffed and shadowy pigeon as markets attempt to gauge the impact of the incoming administration's various policies and intentions.
“There is a lot of [policy action] priced into equities and yields ahead of Trump’s outing,” notes Saxo Bank fixed income trader Michael Boye, with Hansen noting that yesterday’s bullish US consumer confidence print perhaps signalling expectations that the Trump administration will work to repeal the federal health insurance programme known as “Obamacare”.
“The US dollar is putting up a fight, but it’s ultimately in limbo ahead of Trump’s presser,” notes Saxo Bank head of forex strategy John J Hardy, who adds that markets have placed a “tremendous amount of confidence” in the president-elect’s calls for sweeping policy changes.
Beyond the greenback, Hardy reports that AUDNZD is getting a major boost from the global reflationary narrative that swelled in response to yesterday’s Chinese PPI release, with 1.0750 the major level in his view.
'There remains a great deal of uncertainty in USD' — John J Hardy:
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Source: Saxo Bank
One of the more interesting assets to watch in the wake of Trump’s election has been gold, which soared following the vote only to turn around over the holidays. Now, says Hansen, XAU is “inching closer” to key resistance levels at $1,196 and $1,204/oz.
In crude oil, Hansen reiterates his view that any rallies remain “bound to fail” until hedge funds and money managers unwind their present record long position.
Hansen sees $52.75/barrel as the key retracement level in Brent with $50.25 as its equivalent in WTI crude. Today’s US inventories report, he adds, is expected to post a gain of 1.5 million barrels.
Finally, Saxo Bank head of equity strategy Peter Garnry says that he remains bullish US financials into earnings season, with heavy-hitters such as JPMorgan, Wells Fargo, and Bank of America up Friday. In an overall sense, Garnry adds that the projected earnings growth for the S&P 500 index over the next 12 months currently sits at 23%.
In single shares, Danish bioscience firm Chr. Hansen beat expectations in terms of revenues and EBIT today, maintaining its 2017 outlook.
Ultimately, however, today is yet another “Trump trade” day as the voluble president-elect is expected to liberally spice his press conference with the sorts of swipes and sweeping asides that have made his Twitter account a sort of late-period analogue to Franklin Delano Roosevelt’s fireside chats.
From fireside to flame wars, it has been an interesting century for the US of A… and it looks ready to get yet more interesting from here.
From black swans to colourfully crested birds of all types, the "Trump trade"
era is starting to prove interesting. Photo: iStock