10, janvier 2017

Wednesday D. Trump press conference keeps market cautious

Wednesday D. Trump press conference keeps market cautious

Today, correction sentiment strengthened in global markets. The loss of upside momentum and a gradual transition to wait-and-see position comes amid approaching D. Trump inauguration and his first press conference, which will take place on Wednesday. Yesterday, trading in European markets closed in the red - banking and oil and gas sectors declined the most. British Prime Minister made statements on a possible hard Brexit scenario that intensified profit taking and led to correction. However, losses were minor and indices dropped within half of percent (DAX: -0,3%; CAC40: -0,5%) US exchange also moved to corrective mood. Investors fixed profit in anticipation of new president takes office. (DOW -0,4%; SP500 -0,4%; NASDAQ + 0,2%).

Europe and America

Today, most European stock markets opened lower, amid political uncertainty over future UK-EU relations and politics of Donald Trump. US indices futures traded in neutral. The trading is in expectation mood as trading activity is below average.

Oil

Yesterday, Brent oil market continued its correction as well. Oil declined about 4% for a day, amid fears of Iraq and Iran crude production growth in December, an increase of shale production in the United States. All this may undermine OPEC + efforts and a production cuts agreement between major exporters, led by Saudi Arabia and Russia.

Brent closed the day at $ 54.75 level, this is the level of two weeks past ago. Contrary to expectations, Brent oil failed to update the level of $ 60 dollars, as well as failed to rewrite $ 58 level. Oil news background is kindly negative for the market – there is a growing number of drilling rigs in the United States, and looks like the market doesn’t  believe in  OPEC +  agreement practical implementation. The upcoming Trump press conference also has a deterrent character. Taking into account the current picture we expect that during today the oil will trade within the range of $ 54.40- $ 55.50

chart 2017

Forex

On January 10 in FOREX currency market, the dollar index (DXY) which tracks the greenback against a basket of six global peers, lost 0.3% to 101.64 points. Decline below the important psychological level of 102 points suggests that players take a wait-and-see on the eve of US president-elect Donald Trump press – conference  on Wednesday. Although today there was a corrective pullback as American currency has gained somewhat, in general one can not say that the correctional phase of the US dollar is over. FOREX trading also are restrained today.

In general

The inertial growth of the New Year first week seems to end. If last week's markets growth was due to expectations on economic acceleration in the United States, stronger oil, this week is contrarily as the closer the new US president inauguration, the more cautious is the trading. In addition, yesterday GB prime-ministers statement of possible hard Brexit can scare the already cautious European investors. Prospects for a hawkish course of double or even triple rate-hikes this year in the US is now quite high, and we should not forget that this is a factor of increased risk for the stock markets. The situation is extremely interesting. Market positivity is now being formed only on the basis of two factors- strong statistical data (although in our opinion the last non-farm was average ) and expectations of D. Trump election program, designed for US economy growth and deregulation. In this regard, the press conference on Wednesday is very important, as if markets do not see the confirmation of the declared course of action, taking into account how much investors priced  these expectations, the end of the week we may see a strong sell-off of stock assets. All this also applies to the first steps of the new president in office. We must not forget that markets are close to historical maximums and just positive expectations what keep them from correction. If such a scenario takes place, the Japanese yen may once again become a safe haven asset. Today, the focus is on a small block of US data. We expect moderate quiet trading during today's trading session.

chart 2017