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Talking Points
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Asian markets were mostly higher Wednesday after Donald Trump addressed Congress
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The President offered little new, but little to disappoint either
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Markets are looking to the next Federal Reserve meeting with renewed confidence that higher rates are coming
Asian stocks were mostly higher on Wednesday. US President Donald Trump offered few economic details in his much-anticipated speech to Congress but, it seems, few disappointments either.
Trump put a broad overhaul of the US immigration system in play and said the middle class could expect “massive” tax relief. He’s also after a $1 trillion infrastructure program. But these were broad strokes, and ones he has made before. US stock futures jumped as the President spoke, as did the Australian Dollar, but these gains were short-lived.
Away from Capitol Hill, however, a quickening drum-beat of commentary from Federal Reserve speakers has global markets eyeing a March interest-rate rise with renewed certainty. Both the San Francisco Fed President John Williams and New York’s William Dudley have made quite hawkish remarks in the past 24 hours.
Money-market futures now price in about a 70% chance of a hike this month, from 30% or less when this week started. This has strengthened the greenback and, as usual, Asia’s bourses have felt the benefit. The Nikkei added 1.4%, with Chinese stocks also higher. Australia’s ASX was a standout exception. It fell 0.1% by the close but that weakness was put down to falls for index heavyweight Telstra which traded ex-dividend on Wednesday.
News that Australia had avoided recession didn’t do a lot for the country’s assets as a return to growth in 2016’s final three months had been widely anticipated. China’s Purchasing Managers Index (PMI) data were pretty good, too. The manufacturing sector continues to pick up pace, with services still expanding in February, albeit more slowly. These numbers saw daylight as Trump spoke, which may have blunted their impact.
Gold prices took a hit as they often do when markets scent higher US rates- non-yielding gold works best when other assets don’t yield much either. Crude oil prices firmed up a little as Trump said nothing about expanding US output.
The rest of the session will offer various European PMIs, German inflation data and UK consumer credit numbers. From the US will come the Institute For Supply Management (ISM)’s manufacturing index, personal income and spending data and oil inventory numbers from the Department of Energy.
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