Stocks mixed as Trump offers few policy details

People walk past an electronic stock indicator of a securities firm in Tokyo. AP Photo/Shizuo Kambayashi

People walk past an electronic stock indicator of a securities firm in Tokyo. AP Photo/Shizuo Kambayashi

Published Mar 1, 2017

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Singapore - US stock futures pared

gains on Wednesday on disappointment that President Donald Trump

did not offer further details on his plans for infrastructure

spending and tax reforms, but the dollar firmed on growing

expectations of a rate hike this month.

European stock markets were poised for a positive start,

with financial spreadbetters expecting Britain's FTSE 100 and

Germany's DAX to open 0.2 percent higher, and France's CAC 40 to

start the day up 0.3 percent.

Trump pledged to overhaul the immigration system, improve

jobs and wages for Americans and promised "massive" tax relief

to the middle class and tax cuts for companies, but offered few

clues on how they would be achieved.

"Investors had little to grasp, and market reaction during

the speech was choppy and directionless," market strategists

Paul Christopher, Scott Wren and Sameer Samana at Wells Fargo

Investment Institute in St. Louis said.

"The speech was short on details and did not even prioritize

the president’s goals."

Capital Economics' Paul Ashworth said Trump has been

struggling to implement his agenda.

"With Congress getting bogged down by Republican infighting

over efforts to repeal and replace existing health care

legislation, it will take considerably longer to pass tax reform

than we initially thought on election night," Ashworth said in a

note.

"There is now a good chance that it won't happen until early

next year."

US stock futures still pointed to a higher open after

Trump's address, though gains shrank as the speech progressed.

Snapping streak

E-mini S&P futures edged up 0.2 percent, after the Dow

Jones Industrial Average snapped a 12-day winning streak

to close down 0.1 percent in the prior session.

The dollar index, which tracks the greenback against

a basket of trade-weighted peers, advanced 0.5 percent to 101.58

after wobbling during the speech.

The US currency also rebounded against the yen, rising

more than 0.6 percent to 113.47 yen, after erasing its session

gains during Trump's speech.

Reaction in Asian stock markets to Trump's speech was

largely muted, with the MSCI's broadest index of Asia-Pacific

shares outside Japan down about 0.2 percent.

A raft of surveys pointing to stronger factory activity in

China, Japan and other parts of the region were largely

overshadowed by Trump's speech.

"The market has been looking for reassurance that Trump

intends to follow through on his campaign promises for fiscal

spending, tax cuts and deregulation," said James Woods, global

investment analyst at Rivkin in Sydney.

"He mentioned these policies but did not provide any actual

details or time lines, which is what investors are looking for."

"However, in particular I think his rhetoric has been toned

down around protectionism when mentioning China and Mexico,

easing concerns around trade wars."

Markets took note of that shift, with the Mexican peso

trading higher after Trump's speech, although it inched lower

later in the session. While still pledging to build a wall on

the US's border with Mexico, Trump made no mention of his

earlier promises to make the latter pay for it.

The dollar gained 0.1 percent to 20.116 pesos.

In Asia, Chinese stocks advanced 0.2 percent after

the stronger-than expected factory readings.

Japan's Nikkei extended gains to close up 1.4

percent, buoyed by a weaker yen and data showing manufacturing

activity expanded in February at the fastest pace in almost

three years.

Australian shares narrowed earlier losses to end the day 0.1

percent lower and the Australian dollar edged up 0.1 percent to

$0.7666 after stronger-than-expected GDP data showed the economy

had returned to growth in the fourth quarter.

Treasury yields, which had jumped after Fed officials

suggested an interest rate rise might be delivered later this

month, hovered slightly below that level after Trump's speech.

US 2-year Treasury yields were at 1.2961 after

Trump's speech, after touching 1.304, their highest level since

December 15, earlier in the session.

New York Fed President William Dudley, among the most

influential U.S. central bankers, said overnight on CNN that the

case for tightening monetary policy "has become a lot more

compelling" since Trump's election.

US 10-year Treasury yields rose to 2.4132

percent, after touching a session high of 2.426.

Traders now see a better than 62 percent chance of a rate

increase in March, a surge from 31 percent earlier, according to

CME Group's FedWatch tool.

The sharp shift came despite disappointing US fourth-quarter gross domestic product growth, as downward

revisions to business and government investment offset robust

consumer spending.

Data releases later in the session include German

unemployment for February, and U.S. personal consumption

expenditure, inflation and manufacturing activity.

In commodities, oil prices inched higher as supply cuts by

the Organization of Petroleum Exporting Countries offset

concerns about rising U.S. crude inventories.

US crude rose almost 0.1 percent to $54.07 a

barrel. Global benchmark Brent jumped 1.9 percent to

$56.63.

The stronger dollar weighed on gold, which dropped

0.3 percent to 1 244.36 an ounce, extending Tuesday's 0.3

percent decline. 

REUTERS

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