After the biggest drop in equities in almost six months on Tuesday, markets are still dipping downwards, grappling to find a new equilibrium.
The blame seems to be lamped on Donald Trump, who has failed to deliver details on his policies. The market has priced in a large increase in fiscal stimulus from the White House and are tired of waiting. The vague promises that the market has bet on are no longer enough to keep momentum behind the Trump Train.
Equities are now finding a technical correction after swollen prices could no longer be sustained. The S&P 500, a proxy for the US economy, dropped over 1% yesterday. The index has soared by 12% since the election of Donald Trump. The rally was inspired by campaign promises to cut taxes, deregulate financial services and increase infrastructure spending.
S&P 500 down 0.07% at $2339.00
However, since Trump moved to Washington, the US president’s primary focus has been on protectionist policies. Up until now, traders have ignored the harm Trump’s nationalist policies will do to the global economy. However, last weekend’s G20 meeting re-highlighted the strained relationship the Trump administration has with other world leaders and how their goals are misaligned.
Additionally, the Federal Reserve’s dovish outlook has spooked investors, causing many to take-profit.
There are a string of Fed policymakers lined up to speak this week. Investors will pay special attention to Fed Chair Janet Yellen, who takes the stage on Thursday. A more hawkish rhetoric from Yellen may help equities to lift.
- DJ 30 down 0.13% at $20578.00
- Nasdaq 100 down 0.08% at $5330.00
- Russell 2000 down 0.15% at $7236.00
The jitters in US equities spread over to Europe and Asia. After a fleeting relief from bearish tones and euro-sceptic investors, European bourses are once again on a downwards trend.
- CAC 40 down 0.4% at €4957.50
- DAX 30 down 0.25% at €11909.50
- FTSE MIB down 0.8% at €1342.00
- Nifty 50 down 0.4% at ₹ 9049.50
- China 50 down 0.4% at ¥10302.50
Commodity Corner
Crude oil is under pressure, down at $47.51 before the latest inventories announcement, due later today. Crude has failed to inch back up to the $50 mark since over-supply concerns rattled investors.
Gold has seen a boost since last week’s bearish tones. The precious metal is up at $1245.73, when compared to $1203.00 last week.
News Today
14:30 (GMT) USD Crude Oil Inventories
20:00 (GMT) NZD Official Cash Rate