background image background image background image

NY Open: Waiting for the shoe to drop

Equities 4 minutes to read
MO
Michael O’Neill

FX Trader, Loonieviews.net

Summary:  Financial markets are tense when they should be at ease. It’s like they’re waiting for the other shoe to drop and that shoe is President Trump.


The latest round of US and China trade concluded on a positive note. The Federal Open Market Committee minutes were released, and they concurred with Fed Chair Powell’s January 4 comments that the Fed could afford to take a patient approach to rate hikes. There isn’t any major US data on tap today to warrant caution, yet there is a whiff of risk aversion in the air.

Wall Street is paring some of this week’s gains, despite Chinese and US officials saying the trade talks are going well. That’s because they have not shown any evidence to support the claims. Weaker than expected sales data from retailers Macy’s and Kohl’s is being blamed for a bit of the equity market malaise.

Traders are also a tad concerned that their ability to assess the US economy may be hampered by economic data release delays due to the ongoing US government shutdown. They were also nervous about the possible ripple effect from the news that Ford was slashing jobs and closing plants in Europe. The Nasdaq erased all of yesterday’s gains by 15:00 GMT. The DJIA was down 0.58%, and the S&P 500 lost 0.67%.

Those moves may be reversed in the afternoon if Fed Chair Jerome Powell repeats and/or reinforces his somewhat dovish comments from January 4, when he addresses the Washington Economic Club at noon. A parade of dovish Fed speakers has been heard over the past few days, and traders are waiting to see if Powell is in that choir.

A major reason for financial market nervousness is President Trump and how he takes rejection. The Democrats rejected his demand for funding for a Mexico border wall, and he reportedly stormed out of the meeting yesterday afternoon. Trump says he will continue to veto every spending bill that doesn’t include money for the wall, which suggests a prolonged government shutdown. This morning Richmond Fed President Thomas Barkin warned that the government shutdown would soon have a negative impact on business confidence.
usdjpy
Chart: USDJPY 30-minute.  Source: Saxo Bank

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.