Markets continue assessing Trump’s win

<p>As we kick the week off the Trump factor will remain the dominating force out there, with the markets eager to receive more information regarding […]</p>

donald-trump-featured-image_8th-november-2016As we kick the week off the Trump factor will remain the dominating force out there, with the markets eager to receive more information regarding not only the make-up of his cabinet but also what his priorities will be as he enters office – what really is on Trump’s to do list? News flow will continue to drive the markets leading to the possibility of some choppy sessions ahead.

Team Trump taking shape

Early appointments have pointed towards a surprisingly balanced approach from Trump with his chief of staff choice showing signs of moving closer towards Republican mainstream in the form of Reince Priebus, balanced out by an ultra-right chief strategist Stephen Bannon. Given that the first two appointments could have painted a different picture, they have instead provided tonic for the markets as we ease into the start of the week, resulting in a positive start for the FTSE and markets across Europe. However, Trump is unorthodox in his approach and his plans, therefore this is by no means the end of the story and appointments could well drive direction as we continue through the list.

Equity swings are likely to continue

Except for the Nikkei, across Asia we saw flight from emerging market equities as investors try to weigh up what a Trump presidency will mean, including what a possible trade war with China could mean if Trump directs his policies towards the protectionist plans that featured so heavily in his presidential campaign rhetoric. China has requested cooperation from Trump and any trade tariffs will result in a tit for tat trade war which will keep any downward pressure significant.

Chinese economy holds its ground

Following the US election results, China will have been keen for any good news; this came in the form of data showing that China’s economy is broadly stable, as industrial production and manufacturing performed as expected, whilst retail sales came in slightly lower than expected at 10% compared to 10.7% forecast with property sales weighing and pointing towards softening going forward. The take away here is that China is still on track for GDP growth of 6.9%, the economy is still in a sweet spot and it still has space to rein in credit, but questions linger over how long it will remain in this privileged position should Trump impose a tariff on exports or should the Chinese property sector pull back further.

The US dollar continues to go from strength to strength.

Eyes are now turning back to the possibility of an interest rate hike by the Federal Reserve before the end of the year. A Trump win had initially cast doubt on the probability of a rate increase, with the markets pricing in just a 50% chance of a hike on election night; however, this has since rebounded back. With unemployment historically low and Trump’s heavy spending plans taking shape, inflation could well charge higher more quickly than initially forecast. 2 rate rises had been pencilled in for next year, but if Trump decides to front load his spending then we could expect more rises through the year, resulting in the dollar pushing further northwards.

Fed Chair Yellen is set to speak on Thursday and the focus is expected to be on the implications of the presidential elections and the rate hike outlook for not only December but also 2017.

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