Trump policies unlikely to be forthcoming anytime soon

The Day So Far

The DAX has come under some selling pressure at the time of writing amid no one single catalyst. The decline has seen the weeks gains be handed back with the tone being a continuation of what was seen overnight where Asian indices pulled off 1.5yr highs. Ever since the speech yesterday from US Treasury Secretary Steve Mnuchin the market seems to be leaning towards the realisation that an immediate impact from Trump’s proposals in unlikely to be felt in the near-term, and with little new in information regarding policies the market seems a little disappointed by the lack of clarity on the issue. From an earnings perspective two of the banking heavy weights in London are not helping sentiment either with the FTSE 100 touching a two-week low after RBS posting its ninth consecutive annual loss and with Standard Chartered falling 4% after it said it would not be paying a dividend for 2016 due to restructuring costs.

To give you an update on the French election theme discussed yesterday the latest OpinionWay poll shows that Macron would win the 2nd round run-off against Le Pen by a margin of 61% to 39%, reflecting a re-widening of the gap in favour of the centrist politician given the newly formed alliance with Francois Bayrou. The EUR has been largely unaffected by the news but in the fixed income markets the German 2-yr yield continues to print at fresh lows with the schatz on course for its best week since the Euro-zone crisis, benefiting from the move out of peripheral debt and with the ECB stepping up its purchases as part of its QE programme.

The Day Ahead

Despite the downtick in US futures ahead of the cash equity open we still prefer to find a technical point of entry to go long given the broader trend of the rising equity market and the pattern of any sell-off being countered by the close on Wall Street. Despite this view we also prefer a long position in T-notes with our view supported by the information on hand this week which says to us that the Fed are in no rush to raise interest rates and details and implementation of Trump policies are unlikely to be forthcoming anytime soon.

Trump is set to sign an executive order today to establish regulatory reform officers and task forces within agencies, according to a White House correspondent. This isn’t scheduled until 5pm London time and although the issue of regulation is important this announcement is unlikely to be market moving.