US flat but European markets decline as Germany trumps Car Wars threat
Overseas markets were flat to negative with little movement in the Dow. However, the NASDAQ continued its strong run, posting another gain of 0.5%, hitting 5584 points and continuing to make record highs as it pushed up towards the psychological 5600 point mark.
While the FTSE 100 was relatively flat, sharp downturns were experienced by the Dax (0.6%) and the Paris CAC 40 (-0.8%).
This could be attributed to another salvo being fired on the trade wars front. With President-elect Donald Trump having flagged the prospect of a 35% tax on every car imported into the US, it was inevitable that as one of Europe’s largest carmakers, there would be a fairly acrid response from Germany.
Germany’s Vice Chancellor and economy minister highlighted in German tabloid, the Bild newspaper, that the American car industry is getting worse, weaker and more expensive and if US buyers are choosing German models as Trump suggests then that’s why the US needs to build better cars.
With global friction building across Asia and now Europe, and an inauguration speech imminent, the gold price was the winner as it returned to November highs of US$1209 overnight.
Elsewhere in the commodities space, oil fluctuated in and out of negative territory with concerns regarding a build-up in inventories causing nervousness despite the protection of the OPEC agreement.
Base metals were lower across the board, suggesting the heavy lifting in the mining sector will need to be done by gold stocks. However, there were good gains in iron ore which should translate into support for the likes of Rio Tinto, BHP Billiton and Fortescue Metals Group.
While there was a slight pullback in the Australian dollar it is still hovering in the vicinity of US$0.75.
Given the mixed bag of data from overseas and significant global uncertainty ahead of Inauguration Day it is difficult to see any significant upside across the overall market, and this was reflected in the SPI futures, down 13 points as US markets drew to a close.
Some key information to monitor on the domestic front is today’s release of November home loans data and new motor vehicle sales for December.
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