Financial market research and analysis

Dow 21k!!

Pinch punch first of the month, Donald Trump sends stocks up a bunch!

A more inclusive speech from the US President has seen global stocks surge, taking the Dow Jones above 21,000 for the first time. There has been a lot of criticism for the lack of detail on how Trump plans to deliver his “don’t tax and spend” reforms. That misses the point of the speech. By bringing Congress on side, Trump’s plans to “restart the engine” of the US are a lot more likely to become policy.

The surge in the open of US markets was led by the beneficiaries of Trump’s infrastructure and defence spending such as Caterpillar and Boeing.

Ides of March at the Fed

As usual Trump is grabbing the headlines, but the Federal Reserve deserves some of the credit for the record highs. With investors in exuberant spirit, Fed policymakers talking up the chance of a March rate hike is boosting banks stocks without hurting other sectors.

According to fed funds futures, the markets now sees a US rate hike in March as more likely than not. We are still sceptical the Fed can deliver on its planned three rate hikes this year but with unemployment and inflation objectives close to target and no ‘financial tightening’, the Fed’s code for falling markets, they are all out of excuses not to hike in March.

New intraday high for the FTSE

Not to be outdone by our friends across the pond, optimistic British investors sent the FTSE 100 to a fresh record high. The rocket put under British stocks was fuelled by both hopes of Trump-inspired pro-business reform and a sinking British pound ahead of a likely Brexit bill defeat in the House of Lords.

CRH was top riser after well-received results while gold-miners were bottom of the pack as strength in the US dollar weighed on the price of gold.

Peers cause pound puke

The British pound fell against both the euro and the dollar on Wednesday with the House of Lords set to vote to amend the Brexit bill to protect the rights of EU citizens. Once upon a time, the pound might have gained on a decision that delays Brexit, but markets now accepts the UK leaving the EU as inevitable.

A defeat of the Brexit Bill by the House of Lords doesn’t stop Brexit, it just adds to the sense of uncertainty. Today is March 1st so Theresa May has a month to deliver her promised deadline for triggering Article 50. The mounting pressure on the government to get Brexit through parliament could force it to accept the “ping pong” and keep the amendment. The back and forths in parliament are unlikely to reassure a fence-sitting Bank of England that it is right to combat rising inflation with a rate hike. 

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