From the Floor: US earnings set for best in six years — #SaxoStrats#SaxoStrats
• Trump effect continues to keep global indices bubbling higher — Garnry
• Markets anticipating a pullback on regulation from new administration — Garnry
• Dax breakout to the upside facing key test at 11,692 — Garnry
• China rise on lending facility effort to 'avoid excess credit' — Su
• Need to keep enough funding in Chinese system before lunar holiday Friday — Su
By Martin O'Rourke
Or rather high six perhaps as the US earnings season looks set to enjoy its best result for six years on a cocktail of factors bound together by the glue that is the new man in the White House, Donald Trump.
On a less populated Morning Call than usual (blame the winter sniffles), Saxo Bank's head of equities strategy Peter Garnry predicted revenue growth of approximately 3% with around 150 companies reported on the back of growing consumer confidence.
"This has happened from a low base because of the slump in oil and commodities prices but the year-on-year growth looks set to bring the strongest US earnings season in six years," said Garnry. "A lot of the strong sentiment is still directly linked to the news flow from the Trump administration."
The red marks the low base in the S&P 500
Garnry expects Dax to break out above 11,962 Wednesday which, if it happens, "could take us even higher" and also anticipates an upward move in the Spanish Ibex with key player Santander expecting to outperform on the back of the rise in commodity prices and the whole reflation theme.
Santander has a lot of exposure to Brazil which is being driven by the return in commodities prices, says Garnry, which in turn should push Ibex higher.
Dax could be set to break higher
The People's Bank of China tends to get jumpy at this time of year as we head into the lunar holiday and, after it surprised the markets with a move to hiked rate on the six-month and one-year lending facility Tuesday, it reinforced the move by holding open-market-rates Wednesday.
"It signals an attempt to strike a balance between excess credit that could cause bubbles and to keep enough funding in the financial system before the holidays begin on Friday," says Shiyun Su, dialling in from Saxo Bank's Asia hub in Singapore. "Overall, Asian stocks were lifted higher by positive sentiment from US stocks and the MSCI Asia Pac Index hit its highest since September and Nikkei reversed its losses."
Nikkei closed at 19,057.50.
It was a tough night for AUDUSD which slipped 0.6% after CPI for the fourth quarter of 2016 came in at 0.5% up quarter-on-quarter against an expected 0.7%. There was some good news down under though after BHP Billiton's share price rose 3.3% after Chinese demand helped push iron ore production up 9%.