Article / 26 April 2017 at 7:00 GMT

Morning Markets: Equities all in on the Trump tax plan

Former managing editor, TradingFloor.com / Saxo Bank
Denmark







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Watchlist

  • Australia: CPI (published)
  • France: Consumer confidence survey (published)
  • South Africa: PPI (0930 GMT)
  • US: EIA weekly petroleum status report, incl. crude oil and gasoline stocks (1430 GMT)


US president Donald Trump likes a spectacle and with the 100-day anniversary of his tenure on Saturday, he is expected to at last unveil a corporate-tax plan that will cut the level from 35% to 15%.

What that does to the national debt is anyone's guess although figures upwards of an additional $2 trillion have done the rounds. That may see Trump unveil his plan and then face an uphill and perhaps losing battle to get it through Congress, but it will neatly serve his narrative that the president's ground-breaking approach to policy is being thwarted by the establishment.

Markets have cheered to the rafters nevertheless as the French-election feel-good factor allied to strong US corporate earnings has latched on to Trump's latest thrust to take Nasdaq across the 6,000 line for the first time in its history and push S&P500 and Dow Jones close to new landmarks. Safe-haven yen has suffered overnight even while the dollar continues relatively weak to put USDJPY over the 111.0 handle and propel the export-driven Nikkei to a 1.1% rise.

Gold has also taken a significant hit to bob in and around the first line of support at $1,264/oz and the US 10-year Treasuries yield is once again firmly ensconced in territory well above 2.3%.

While Trump looks to score a big public relations victory and deflect criticism that he has been unable to get his domestic agenda up and running since January 20, his plan has come hand-in-hand with a $1 billion shift in the direction of protectionism after slapping tariffs on Canadian timber imports.

That won't make a dent in the corporate-tax plan addition to the debt of course if it sees the light of day, but it indicates where we might be headed in a Trump presidency in a move that has been widely condemned as damaging to both sides. It has most certainly damaged CAD and USDCAD continues to mount in front of key resistance at 1.36.

Elsewhere, oil remains nervy going into this afternoon's EIA inventories report. While a six-day slide was halted Tuesday, the market is in abeyance and another damaging print could tip the scales yet further to the downside.

Market signals

Asian session

  • After Wall St rose overnight on surging tech stocks, Asian markets traded higher
  • The ASX200 rose 0.9% ahead of local inflation data
  • The Nikkei was up 0.73%; the Topix up 0.9%, climbing for a fifth straight day 
  • Australia's CPI rose 0.5% for the quarter (0.6% expected), 2.1% for year (2.2% expected)
  • Australian consumer confidence has fallen for the second straight week
  • The ANZ/Roy Morgan Consumer Confidence Index is now below its long-run average
  • The US/Canada trade spat is a worry for Asian exporters reliant on US markets
  • The HK dollar is sliding as investors switch to USD due to interest rate differentials

Forex ahead

  • The euro edged up to $1.0938 
  • The Canadian dollar hovered at low levels reached after news of US tariff on lumber
  • The Australian dollar was weaker at around 0.7515
  • The yen edged lower against the dollar as safe-haven demand eased

From the Floor

On the rise. "We are still seeing positive surprises in the US against expectations helping fuel the bull market," says Garnry.

Nervous oil. "We've seen the market stabilise after another selloff Tuesday," says Hansen.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
More good news is expected in this month's sentiment update from Brazil's consumer sector, writes James Picerno

6,000 in sight
The ASX200 was up 0.8% following gains on Wall St and ahead of local inflation data, writes the team from Saxo Capital Markets (Australia).

Timber tantrum
The US has slapped a troublesome 20% tariff on Canadian exports of lumber to the US, denting the Canadian dollar and lifting lumber futures, writes Stephen Pope.

French toast
France's likely next president, Emmanuel Macron, will face big challenges to reform the economy and could be hampered by lack of parliamentary support, says Neil Staines.

Lumberjack

 President Donald Trump is expected to try to axe the US corporate tax rate. Meanwhile, 
he has slapped a new tariff on Canadian lumber. Photo: Shutterstock


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