Article / 10 February 2017 at 8:00 GMT

Morning Markets: Trump reinvigorates the reflation trade

Former managing editor, / Saxo Bank



  • Germany: Bundesbank President Jens Weidmann speaks (1000 GMT)
  • US: University of Michigan Consumer Sentiment for February (1500 GMT)

US president Donald Trump finally broke his silence on the great reflation trade pledging a 'phenomenal' plan for the overhaul of business taxes to be ready in the next 2-3 weeks. Detail as ever was scant, but it was enough to cheer global indices with Dow, S&P 500 and Nasdaq all soaring to record levels.

In Asia, Nikkei in particular caught the tailwind to blast to a 2.5% on-day jump while Hang Seng and Shanghai Composite's respective 0.62% and 0.51% rises were more in line with US indices. FTSE100, Dax and Cac40 can all anticipate a fast start Friday morning.

Dollar powered higher against most currencies through the Asia session as only sterling and euro managed to hold their ground. USDJPY was particularly on the move some 150 pips higher going into the hour before the European open compared to Thursday morning.

With Japanese prime minister Shinzo Abe meeting Trump later today, the former might wonder if the president will turn on the charm or go on the attack as it is becoming increasingly clear that a strong-dollar strategy is not part of the 21-day old administration's blueprint. And, while we're on the subject of best laid plans of mice and men, Trump's battle with the US judiciary over his travel ban goes on after a San Francisco judge upheld the suspension of his executive order.

Trump may have become its most infamous user, but Twitter shares plummeted more than 12% overnight after a horrible fourth-quarter print unveiled a $167 million net loss. Losses for the full year were $457 million and leaves the social-media platform in a quandary over its business model after a fall in Q4 advertising revenue.

Gold's drive to $1,250/oz for now looks over on the back of the Trump-led risk-on shift while US 10-year Treasuries yields are back to 2.41% owing to the bonds selloff. A revival of Greece debt fears, meanwhile, accelerated the rise in yields on the 10-year from 6.5% to 8% after the IMF warning midweek. Bundesbank chairman Jens Weidmann will no doubt wax lyrical this morning.

Finally, oil seems to be taking a breather after some counter-intuitive turns this week. Both Brent and WTI were marginally up on the same period 24 hours ago.

Market signals

Asian session

  • Asian markets made gains after Trump's tax plan talk gave Wall St a lift
  • The Nikkei 225 soared, reversing recent falls; it was up by a robust 2.3% at 0400 GMT
  • The temporary suspension of Trump's travel order has been upheld
  • Japan's year-on-year PPI rose 0.5%, more than expected
  • Japanese PM Shinzo Abe will focus on security, fair trade when he meets Trump today
  • Nissan will press ahead with a new plant in Mexico despite Trump's tariff hike threat
  • News Corp attributed a Q2 loss to impairments at its Australian newspaper businesses
  • The RBA expects Australia's GDP growth to dip to just 1.5-2.5% in FY 2017
  • This is down 1 percentage point from its November forecast
  • Australia's home loans rose 0.4% in December, lower than the 1% expected
  • The S&P/ASX200 broke through 5,700 points on the positive lead from Wall St
  • It rose 1% today to 5720.6, for a weekly gain of 1.8%
  • China's exports were up 15.9% and 25.2% respectively in the 12 months through January

Forex ahead

  • USD rose after Trump's comments about an upcoming "phenomenal' tax plan
  • The US dollar made gains against the yen; it was worth ¥113.7000 at 0219 GMT
  • AUD rose to 0.7655 on the strong China trade data
  • NZD was well down from recent highs near 0.73; it was worth 0.7195 at 0221 GMT

From the Floor

Bonds go bearish. “We are seeing a full-speed correction in fixed income markets,” says Boye

Q4 calamity. "Twitter still has way too much body fat and job cuts would not be a surprise," says Garnry

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

In opinion

With no serious economic news, political risks and US President Trump have dominated headlines in the latter part of the week, writes Juhani Huopainen.

Bad News day
News Corp cited impairments in its Australian newspaper business as a key factor 
in its second-quarter loss of $219 million, say Sydney's Saxo trading team.

Between the lines
If we take the Russians at their word, then they have come in exactly on target with the oil cuts agreed with Opec. Problem is, says Nadia Kazakova, the data has suddenly become elusive.

Head scratcher
The about-turn in oil to the upside despite the EIA reporting a 13.8 million barrels build in inventories owes everything to a fall in gasoline stocks, writes Ole Hansen.


Topsy-turvy oil has taken a counterintuitive turn this week. Photo: Shutterstock

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