Market Snapshot – Can Trump Turn it around on Capitol Hill

Equity Markets Rebound

Following days of uncertainty over whether the equity market rally was officially over, markets rebounded through the day. Europe’s major indexes moved back into positive territory, with the DAX moving back to 13,000 levels ahead of the U.S open. Consensus has been that tax reforms have weighed heavily on the markets. Hopes are that the Senate will pass the bill and then look to address differences that exist with the House of Representatives. There could yet be another twist to the story, but for now, it’s green across the board with Dow and S&P future also pointing to a recovery on the day.

UK Retail Sales Remain Steady

In spite of concerns that consumer spending in the UK has ground to a halt, figures continue to surprise. When the UK economy will eventually feel the full force of the risks associated with Brexit remains to be seen. Perhaps November figures will reflect the rise in geo-political risk, but for now it’s been solid and the Pound continues to avoid a tumble. One does question how much longer the Pound can hold on and whether a material decline would ultimately wipe out the Bank of England’s efforts to curb inflation. The good news is that the gap between wage growth and inflation has narrowed. Members of the monetary policy committee will need to see the trend continue.

At the time of writing, the Pound was up 0.17% at $1.3194.

U.S Tax Reform Bill

While market risk appetite has improved through the Asian and European session, the markets will need to be cognisant of what lies ahead. U.S Treasury yields have been on the slide and the Dollar has remained on the defensive, despite more hawkish FOMC member commentary. Can Trump turn it around? The markets certainly hope so. Thrown into the mix will be FOMC member commentary through the U.S session. Yields could find their footing should all go according to plan.

The Dollar Spot Index was up 0.16% at 93.96 at the time of writing, with all to play for through the rest of the U.S session. Trump needs to deliver and pressure is on.