What’s trending overseas

Uncertainty and fear of the unknown drove most post Inauguration Day markets, and this was evident last night in both the US and Europe with flat to negative performances from the Dow and the NASDAQ, and declines of approximately 0.6% in the FTSE 100, the Dax and the Paris CAC 40.

One of the most interesting moves was a significant strengthening of the Great Britain Pound against the US dollar, suggesting investors may feel a Brexit is more palatable than President Trump’s total exit strategy.

The focus has been intensifying on how Trump will actually execute on protectionist policies given the country’s reliance on the importation of cheaply manufactured goods to drive down the cost of living.

Imports from cheap manufacturing hubs in the broader Asian region are essential in terms of placing downward pressure on prices and keeping everything from household items to consumer discretionary products such as mobile phones and televisions within the reach of the average American.

While tax cuts will increase net income, the jury is out as to whether they can compensate for considerably higher consumer spending on goods that were traditionally sourced from overseas, but under the new regime, would be manufactured at a much higher cost in the US.

In the wake of the inauguration it was White House Press Secretary Sean Spicer who was the first casualty. A little like being corrected on the first day of school for not being able to count, in his first official briefing he released inauguration crowd figures that were clearly ‘trumpaganda’, and he was subsequently slammed by the media.

Looking at the more tangible, on the commodities front, gold spiked from the previous day’s close of US$1204 per ounce to hit a high of US$1219 per ounce, perhaps evidence of a shift towards safe haven investments.

While there was little movement in nickel and copper, a strong performance by zinc resulted in it pushing up towards record December levels before retracing late in the session.

As is often the case, lead followed suit, increasing from the previous day’s close of US$1.05 per pound to US$1.075 per pound. Declining warehouse stocks of both zinc and lead tend to suggest the rally has legs.

Iron ore was slightly stronger, while oil gave up some of the previous trading session’s gains to finish at US$52.80 per barrel.

As markets drew to a close in the US, the Australian dollar was fetching US$0.757.

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