Trump sends equities lower
The announcement by President Trump that he is walking away from fiscal stimulus negotiations stopped the intra-day rally in its tracks in New York. With so much hope built into the recent rally, equities abruptly changed direction, finishing lower on the day. Notably the S&P 500, Nasdaq and Dow Jones, all traced out bearish outside reversal days.
The S&P 500 finished the day lower by 1.40%, the Nasdaq fell 1.57%, and the Dow Jones fell 1.35%. Of course, any hints that negotiations could emerge from the isolation ward will turn sentiment just as quickly. Until that time, though, if it occurs, US markets likely have some way to correct still to the downside.
On a positive note, I do not believe that the possibility of a stimulus agreement are now gone forever. One of Mr Trump’s favourite negotiating tactics, as we’ve seen in the past, is to walk away from the negotiating table abruptly. The intention is to pressure the other side into concessions. Only time will tell if Trump’s non-subtle approach will succeed. With so much hope pinned on the stimulus agreement coming to life though, the potential market correction could have some way to run, especially given the technical developments on the leading US stock indices.
With China away, and a data vacuum today, Asian markets are tracking sideways as profit-taking lifts US index aftermarket futures. Also helping is that Asian markets never fully bought into stimulus euphoria yesterday. The Nikkei 225 has fallen 0.30% while the Kospi is up 0.20%. Hong Kong has risen 0.65% with Singapore is flat.
Australian markets have risen sharply, with last night’s budget bringing forward tax cuts, bulging with fiscal goodies and reduced bank lending red tape. That sees the ASX 200 rising 0.85% with the All Ordinaries climbing 0.80%.
Asian markets have been saved by the bell as US stock futures rise modestly this morning. The best of those gains has probably run their course though with markets only one headline surprise from resuming their march lower.
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