Morning Markets: UK's May battle-ready for Trump showdown
- Euro area December M3 Money Supply & Lending (0900 GMT)
- US December Durable Goods Orders (1330 GMT)
- US Q4 Gross Domestic Production (1330 GMT)
- UK's Theresa May meets US president Donald Trump
It's D-Day for UK prime minister Theresa May as she prepares to become the first foreign leader to have an audience with US president Donald Trump this afternoon. May Thursday addressed Republicans at a congressional retreat where she criticised China's increasingly "assertive" stance, defended Israel and even admitted it is time to engage with Russia.
In other words, the line that Trump would have wanted and probably demanded of her. He will also have liked her appeal to his ego to assume the mantle of leadership and will have particularly noted the shift away from Beijing after the previous administration of David Cameron and George Osborne had assiduously pursued stronger trade links.
Where will it get her? A phone call to Mexican president Pena Nieto might prove astute after he was left bristling by Trump's assertion that he would push ahead with that wall on the border and that Mexico would pay for it through a 20% tax levy on Mexican goods (and perhaps through the exchange rate after USDMXN spiked to 21.375).
Without the protection of the European Union, London goes into the talks with more than a hint of the Emperor's new clothes and while there will be advantages for Trump in making the right noises, the 'America First' mantra that dominated his inauguration speech will imbue the summit.
GBPUSD weakened overnight to return to the 1.25 handle ahead of the talks, USDJPY headed back above 115.0 and EURUSD was once again focused on the 1.0650 mark. USDCNH also rose sharply overnight breaking out of the zone around the 6.80-83 mark to head above 6.87. Gold was also in retreat on the back of dollar strength although oil managed to resist the wave.
The global equities rally continues almost unabated, nevertheless, with S&P 500 breaching 2,300 for the first time before retracing, Dow Jones still pushing higher and Nikkei rising 0.34%. There were marginal pullbacks in FTSE100, the Hang Seng Index and the Nasdaq Composite but not to any kind of extent that undermines the bull wave. The fear that a reckoning could come at some point, however, is hard to shake, even if enthusiasm for the Trump trade still remains in place.
And it is to that man that we ultimately return. China's Xi Jinping, Germany's Angela Merkel and even Russian president Vladimir Putin will all be following the outcome of today's meeting with May very closely as they try to glean what kind of president they are dealing with. Will he choose to make an example of her?
In her favour, she leads the country that called time on the EU and Trump has form in trumpeting the Brexit decision. He might also want to show the world that he is not all fire and brimstone when it comes to his bilateral relations.
Against May, however, is the anti-establishment mantra that swept him to power. What after all represents establishment better than Great Britain, last bastion of the empire and architect of a world order that held sway for a century or more? May must tread carefully.
- Markets in China are closed until February 3 for the Lunar New Year
- The Korean Stock Exchange was closed for the start of a three-day holiday
- Asian markets were generally all higher at the start on overseas leads
- Hong Kong's Hang Seng clawed its way up before falling in late trade
- The S&P/ASX200 surged higher after the Australia Day holiday; it closed up at 5714
- Japan's national core CPI came in at minus 0.2% year on year; minus 0.3% was forecast
- Tokyo's core CPI was minus 0.3%; higher than the minus 0.4% expected
- Australia's export prices soared 12.4% in Q4, helped by rises in commodities prices
- Australia's producer prices rose 0.5% in the December quarter; up from 0.3% in Q3
- Trade relations hit the Mexican peso; it was down 1.1% against the USD before recovering
- The dollar index rose from a seven-week low to trade at 100.52 in early Asian time
- The USD rose to a high of ¥115.04 early on Friday on news from the BoJ
- The BoJ announced an increase in 5- to 10-year Japanese Government bonds purchases
- The Australian dollar held above 0.75; it was worth 0.7525 at 0615 GMT
- The NZ dollar traded below its recent 0.73 peak; it was worth 0.7243 at 0615 GMT
From the Floor
EURUSD retracing. "We've crossed back below the 1.0720 area but we need to see some follow through," says Hardy.
Corporate earnings booster. "It's the biggest rebound in operating profits," says Garnry.
Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.
Much is expected from the new US President and due to understandable fears, not everything is discounted yet by the financial prices, writes Juhani Huopainen.
Beware the bubble
The trumpflation trade is a speculative bubble and as with all speculative bubbles, it will burst, says Christopher Dembik. The biggest irony is the US economy does not even need it.
After a torrid five years, commodities can look forward to a far better 2017, especially if a rebalancing of the oil market does come to fruition, writes Ole Hansen.
It's easy to believe Donald Trump has been suckered in by Russian president Vladimir Putin but Nadia Kazakova can see a clear strategy underpinning the new president's approach.
Cry 'God for Harry, England, and Saint George!'. Photo: iStock
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