Global stocks staged an awe-inspiring rebound during late trading on Wednesday as investors came to terms with the shocking Trump presidential victory. Asian shares rallied in the early sessions of Thursday with the Nikkei lurching close to 7% as participants re-evaluated the global impacts of Donald Trump’s severely mispriced election win.
European markets may receive a welcome boost from Asia’s bullish momentum and the positive domino effect could support Wall Street later today. Although the short-term gains in stocks are impressive, investors should keep diligent especially when markets have been infected by jitters. Stocks remain depressed in the medium term with steeper declines expected as uncertainty grips risk sentiment.
Dollar bulls relentless…
The dollar appreciated with aggression on Wednesday afternoon following Donald Trump’s presidential speech, which effectively eased some concerns over his economic policies. Pledges of massive U.S. fiscal spending have heightened expectations of Trump implementing fiscal stimulus measures, including tax cuts which may bolster profit growth consequently boosting inflation.
Dollar's resurgence was also complimented by the renewed speculations of the Federal Reserve raising US interest rates in December that encouraged buyers to attack. This week’s aggressive dollar rebound may be fully Trump driven with more time needed for the greenback to find some normality.
Some attention may be directed towards Thursday’s unemployment claims report which may reinforce some expectations of a December rate increase if unemployment claims recede.
WTI bears eye $44.00
WTI oil lurched towards $45.92 during late trading on Wednesday as markets embraced the Trump reality. This feeling was short lived on Thursday when prices sunk back towards $45 following the ongoing oversupply fears that haunted investor attraction. Oil continues to be dogged by persistent oversupply concerns while fears over slowing global growth have sparked discussions of a potential decline in demand.
This terrible combination of oversupply anxieties and tepid demand concerns may be the ingredients needed for sellers to send WTI back below $40. Investors have clearly maintained a cautious stance ahead of the November 30th pending OPEC meeting with expectations periodically diminishing over a successful freeze deal. From a technical standpoint bears need to conquer $44 for a further decline towards $43.
Currency spotlight – EUR/USD
The EUR/USD was explosively volatile on Wednesday with prices whipsawing within a near 400 pip trading range and the culprit was a chaotic dollar. With the Greenback potentially strengthening further amid renewed US rate hike expectations, the EUR/USD could be exposed to steeper losses as bears install repeated rounds of selling. From a technical standpoint, prices have turned extremely bearish on the daily timeframe as the candlesticks are trading below both the 20 and 200 SMA. A decisive breakdown below 1.0900 could encourage a further selloff towards 1.0850 and potentially lower.
Commodity spotlight – Gold
The erratic movements Gold dished out on Wednesday was out of character with most investors left bewildered as the precious metal surged over $60 before crashing back down. Risk aversion amid the uncertainty should clearly support Gold but market sensitivity continues to direct investors to riskier assets consequently leaving the zero-yielding metal vulnerable to losses. Gold may maintain ground in the new trading week as participants reassess the conditions of the global financial landscape. From a technical standpoint, bulls must break back above $1285 for a further incline towards $1308.
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