Swissquote Bank: Trump found not guilty. Equities, oil and US dollar rally

Swissquote Bank: Trump found not guilty. Equities, oil and US dollar rally

Commodities United States US-dollar

Trump found not guilty. Equities, oil and US dollar rally.

by Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank

US Senate voted to acquit the US President Donald Trump on charges for abusing power and obstructing Congress. As such, Trump’s impeachment trial is over with no surprise. Now, he can fully concentrate on his election campaign and he probably has a good chance to win a second term. The anticipation of a Trump win should continue boosting demand in US equities.

So, the stock rally is full on. The S&P500 (+1.13%) and the Dow (+1.68%) traded at a fresh all-time high, as Nasdaq (+0.43%) consolidated gains near record.

The US 10-year yield jumped to 1.6761%, as capital poured into the stock markets to celebrate the end of Trump’s trial.

Spot gold steadied at $1552/1558 per oz.

Stocks in Asia jumped on the back of a bull, as well. Nikkei surged 2.86%, Hang Seng and Shanghai’s Composite advanced 1.96% and 0.99% respectively. The ASX 200 gained 1.05% although retail sales in Australia fell 0.5% m-o-m in December versus a 0.2% drop expected by analysts and +1.0% printed a month earlier.

In the US, the data was encouraging, however. The ADP report came well above the analyst expectations on Wednesday. The US economy added 291’000 private jobs in January versus 157’000 penciled in by analysts and 199’000 printed a month earlier. The unexpected rise in the US employment figures revived hopes that Friday’s nonfarm payrolls could also surprise on the upside, even though a good ADP report doesn’t necessarily mean a solid NFP number.

Anyhow, the strong ADP report was primarily accountable for the sharp fall in euro and pound against the US dollar on Wednesday. The euro slid below the 1.10 mark against the greenback, as Cable slipped below 1.30 and consolidated.

WTI crude bounced 2.50% to $52.20 per barrel as the renewed stock rally brushed off the anxieties about coronavirus, at least for a while. Meanwhile, OPEC experts extended their meeting to a third day to gauge the implications of the coronavirus on oil demand and to decide whether an early ministerial meeting is necessary to curb production before the scheduled March gathering. OPEC+ is now expected to cut the production up to a million barrels a day to maintain the price stability faced with a 20% slump in Chinese oil demand.

FTSE (+0.65%) and DAX (+0.78%) futures hint at a positive start in Europe. The FTSE 100 is preparing to open above the 7500p mark with the support of higher oil prices and a cheaper pound.

On the data front, it will be a slow day in Europe. The European Central Bank’s (ECB) Economic Bulletin, the economic forecasts and Christine Lagarde’s second day of speech will be of interest. Lagarde said yesterday that the forward guidance and asset purchases act as ‘effective automatic stabilizer’. She will probably follow in his predecessor Mario Draghi’s footsteps in aggressive forward guidance and ultra-lose monetary policy – a hint that the euro may remain under a reasonable downside pressure and extend weakness below the 1.10 mark.

In the UK, the services PMI data showed that the activity in Britain grew at its fastest pace since October 2018. But the pound remained under the shadow of a strong US dollar, and perhaps the growing anxiety that the tough bilateral negotiations with the EU could wipe away a part of the optimism seen in the business surveys. The January figure may indeed be an exception to a suite of data that has remained near or slightly below the 50 mark since more than a year.