US stocks and industrial commodities were riding high and the dollar held steady at the end of a week in which an outbreak of worries over forthcoming European elections was replaced by renewed bullishness about the policies of US president Donald Trump.
The more confident mood was also driven by optimism about corporate earnings and evidence of strong trade growth in China.
On Wall Street, the S&P 500 equity index was up 0.3 per cent at 2,314 at midday in New York on Friday, and heading for a second successive record-closing high. For the week the benchmark measure was 0.7 per cent firmer.
The Dow Jones Industrial Average and the Nasdaq Composite were also trading at all-time peaks, while the small-cap Russell 2000 was near record levels.
The end-of-week rally for riskier assets was largely triggered by Mr Trump’s promise on Thursday of a “phenomenal” announcement on taxes in the next few weeks – potentially at his February 28th state-of-the-union address to Congress.
Given that the “reflation trade” in markets since Mr Trump’s election win was largely fuelled by his promises of fiscal stimulus, infrastructure spending and deregulation, it was not surprising to see equity bulls relieved that further clarity might soon be forthcoming.
Uncertainty
However, some cautioned that considerable uncertainty remained. “The tax cuts could be delayed if the House Republicans insist on packaging them together with the more contentious proposals like the switch to a destination-based cash flow corporate tax,” said Capital Economics’
Paul Ashworth
.
“Getting agreement on the latter might take much longer, in which case the fiscal stimulus could be delayed until well into the second half of 2017.”
Meanwhile, a further boost to risk appetite came from news that Mr Trump had told China’s President Xi Jinping that he would respect the “one China” policy, soothing concerns in the market about potential tensions between the two countries.
That news came as China reported January trade data showing a 7.9 per cent year-on-year gain in exports and a 16.7 per cent jump in imports. – 2017 The Financial Times Limited
