Market Overview 2017-12-21
Throughout 2017, the promise of Trump’s flagship tax cutting programme, has bolstered the value of equities, as investors have immediately translated the cut as substantial increased profits for major corporates, leading to increased shareholder rewards and dividends. With the programme now only a step away from becoming law, it would appear that the markets have fully priced in the tax cuts, investors may now be struggling for further reason to send equity markets higher. The U.S. dollar sold off initially versus the U.K. pound and euro, but made major gains versus yen. Gold increased, edging close to the 200 DMA sited at 1269. Economic calendar news from the USA mainly concerned mortgage applications which (in an expected seasonal fall), were down -4.7% for last week, whilst existing home sales bucked the seasonal trend and beat forecasts, by coming in up 5.6% for November and at 5.81m for the year.
European indices sold off sharply throughout Wednesday’s trading sessions, economic calendar news was scarce,however, the U.K. Brexit negotiation team threatening to shoot itself and the banking system in the head, probably didn’t help equities hold up. The IMF also issued stark warnings to Europe (as a wider area) and suggested that the ill effects of Brexit were already becoming visible for the U.K.
The U.K. prime minister delivered a veiled threat, in a committee hearing at parliament, that the Eurozone and Europe’s banks would find out just how much it needed the City of London after Brexit, whilst the BoE issued a statement (through the governor Mark Carney) at a separate hearing, that Eurozone banks would still be able to conduct business in the U.K. after Brexit. How Theresa May believes that threatening the 10,000+ Deutsche Bank workers in the U.K. somehow works in her favour, is a mystery. And given that a high percentage of the workers will be highly paid U.K. taxpaying citizens, her clumsy blackmail appears to be even more bizarre. During the evening sterling gave up its gains, Tory chaos (due to yet another government minister resigning under a cloud after sexual allegations), has once again caused concern regarding the overall competence and governance of the Tory government. Sterling fell, or finished flat versus the majority of its peers, with the exception of yen, which fell versus the majority of its peers. In late trade the New Zealand dollar made significant gains, as GDP came in ahead of forecast at 2.7% YoY. Earlier in the day credit card spending in N.Z. recorded a huge surge; up 9.1% YoY. European economic calendar news was also scarce on Wednesday, the German producer price index marginally missed the forecast, whilst the U.K. CBI total reported sales for December missed forecast, although both monthly readings are only regarded as low impact. The euro made significant gains versus its main peers, with the exception of NZD.