Global Stocks Steady Ahead of Trump’s Speech

European stock market kicked off the day in positive territory this morning, before being pegged back as the markets look ahead to Trump’s address to Congress at 9pm GMT, macroeconomic data likely to be brushed aside through the European session.

Speculation over what policies will be covered in tonight’s address to Congress, if any, have the markets ultimately hanging, with hopes of a detailed outline on tax reforms and a revamp of the healthcare sector expected by the markets at a minimum, though we may see disappointment, should Trump continue to avoid the subject of infrastructure spending.

European markets will be closed at the time of the address, and have yet to show a clear direction ahead of tonight’s address and, while macroeconomic data out of the Eurozone this morning provided support for the CAC 40, following the release of January’s French consumer spending figures, the stats were certainly not justification for a rally, markets rightly nervous at the prospect of a disappointment tonight, which would be a Trump broad strokes approach on policies and an inability to deliver in a statesmanlike manner.

While tonight’s address is the key item on the calendar for the day, consideration will also need to be given to the possibility of a FED rate hike in March, with a number of FOMC voting and non-voting members scheduled to speak through the week, voting member Kaplan having kicked off proceedings with a hawkish view on Monday.

Assuming that Trump delivers this evening, the FED will have less reason to hide behind the policy uncertainty script seen in the two most recent FOMC meetings, which would certainly be Dollar positive, supporting appetite for European equities and plenty of support is needed as we continue to consider the increasing geo-political risk in Europe ahead of the Dutch and French elections, Marine Le Pen certainly ruffling the Establishment’s feathers ahead of the 1^st round vote in late April.

As things stand, we would expect the markets to err on the side of optimism, rather than caution, through the day, though any gains are unlikely to warrant recognition, as appetite for the safe havens clearly remain with the Dollar down 0.45% against the Yen at the time of writing, with gold looking set to make a move.

European equities continue to move in and out of the red through the early part of the day and gold has struggled for direction, sitting down 0.34% at $1,254.75 at the time of the report, despite an easing in the Dollar.

The DAX is the worst performer on the day, falling as much as 0.31% before recovering to a 0.02% loss at the time of the report, gains in the EUR weighing on the index, with the FTSE 100 feeling the negative sentiment towards metals, following the uptick in the probability of a rate hike in March. Trump could reverse the negative sentiment towards metals, but he’ll need to be do more than just talk the talk on infrastructure spending.

It’s all to play for, but we’ll likely have to wait till tomorrow’s session for the market reaction, with the Dollar and gold expected to see some sizeable moves through the address.