Dow Futures Reach Record Highs

Analisi Giornaliera - 11/11/2016

Key American Equity Benchmark Climbs To New Heights, Rising the Last 4 Sessions


Inspired by Trump’s vision for fiscal stimulus via a combination of infrastructure spending and tax cuts, traders sent futures of the Dow Jones Industrial average to a new all-time record earlier on Friday.  Even though technology and healthcare stocks have been under pressure, the proposed changes have seen sentiment towards the outlook improve dramatically.

Dow Extends Gains To New Intraday Record

US stocks are largely continuing their winning streak of the last few sessions, benefiting from the perception that Donald Trump’s tax plan and aggressive fiscal stimulus plans will help improve the environment for US corporations.  Besides providing these huge multinationals with an opportunity to repatriate cash held overseas back to America, he is also proposing some of the most competitive tax rates amongst advanced economies, helping these multinationals rebuild their American presence.  Furthermore, plans are already in place to renegotiate key trade deals, with even the Canadians and Mexicans agreeing to revisit the North American Free Trade Agreement (NAFTA).  As one of his major campaign promises, Trump actually has the power to enact trade reforms.  In the meantime, futures of the Dow Jones Industrial Average have just reached record intraday highs, bolstered by political momentum.


USDJPY Climbs to Multi-Month Highs

Despite no signs that the Bank of Japan is currently prepared to expand its ongoing stimulus measures, USDJPY continues to climb, reaching the highest levels since July as US dollar momentum propels the pair higher.  Although the Central Bank was prepared to intervene if volatility caused sharp spikes in exchange rates, not such activities transpired, signaling that further intervention is unlikely even with heightened volatility.  According to a Reuters poll of economists, approximately 90.00% believe that the Bank of Japan will wait until the second half of 2017 before acting on monetary policy.  Helping affirm this belief are gains in the dollar, which could translate to inflationary upside as the Yen depreciates versus peers.  Greater fiscal policy expectations have spurred a rapid dollar rally, easing pressure on Japanese Central bank officials as they work to reach the inflation target.


ECB Unsure How to React to Trump

With volatility still above average heading into the last session of the week, central banks across the globe are cautious after the US election outcome.  Considering President-elect Donald Trump’s tremendous spending plans and taxation changes, there is significant scope for the American economy to continue improving over time.  Should the US start raising interest rates, it alleviates the pressure on other advanced economies that want to keep their currencies competitive by raising the value of the US dollar.  However, some European leaders are choosing to use recent events as a lesson.  European Central Bank Executive Board Member Benoit Coeure came out earlier stating that continued reforms are needed to strengthen Euro Area economies.  Although policy was likely to remain accommodative, he did not rule out further action if volatility remains.  EURUSD is slightly higher on the session, but not far from multi-week lows.


Copper Prices Reach 16-Month High

On the back of Trump’s infrastructure spending plans, copper has mounted one of the best price rallies in years as speculation of greater construction raises hopes for industrial metals performance that has been beat up by persistent oversupply.  Mining and production overcapacity had caused a precipitous fall in copper over the last two years before massive Chinese fiscal stimulus helped the metal rebound.  While Trump’s proposed investments in the US economy would help boost demand for copper prices, it remains to be seen if the rally will last based on existing production spare capacity.  However, some are concerned the rally may be overdone, especially in light of growing calls for greater trade protectionism.  Copper prices are trending near fresh session highs, topping 2.6400 with trading volumes still above average.


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