• Congress vote puts markets on hold – AM Briefing

    Early moves

    - Little movement in Europe as PMIs impress It’s been another mixed open for European stock indices this morning although overall there’s a slightly softer tone. It’s all been something of an anti-climax after yesterday’s anticipated House vote on repealing and replacing Obamacare was delayed. It’s unclear what may happen next although the president is pushing for the vote to take place today. Mr Trump has also said that without a vote he’ll move on to other issues and leave the controversial Affordable Care Act in place. The outcome of the vote is viewed as a crucial test of the Trump administration’s ability to push through legislation not just on healthcare, but also on tax reform, future spending and regulatory roll-back. Trump can only afford to lose the votes of 22 Republicans, but ahead of the debate it appeared that as many as 30 representatives from the GOP were threatening to defy their president. This would be an early and unwelcome defeat for the new president and would undoubtedly delay any chances of fresh fiscal stimulus coming through this year. Given that the stock market rally since the November election has been based on Trump’s campaign promises, any possibility that these may not get through Congress raises the risk of a sharp market sell-off. Investors have been banking on fiscal stimulus to offset monetary tightening from the Fed, particularly as there are fears that US growth appears to be less robust than it was even a few weeks ago. PMI data came out this morning for Germany, France and the European Monetary Union, with all exceeding expectations. The real surprise, though, was that it had little effect on the stock markets, with traders instead looking towards larger political events to judge their next moves. When PMI figures come in above 50, this is usually seen as a positive and so can create bullish sentiment for the euro.

    Stock Market Update

    - RBS and NatWest to close more than 150 branches - PwC and MF Global settle $3 billion lawsuit Royal Bank of Scotland announced this morning its plan to close a total of 158 high street branches, many of them NatWest, as the trend towards online banking continues to threaten the necessity of physical bank branches. RBS are joining the queue of a long line of banks in the UK to do so, with the likes of Lloyds, HSBC and Yorkshire building society all announcing closures in the past nine months. RBS is receiving some criticism for the move, as it emerged these 158 branches will not include the 86 closures they mentioned late last year. The high-profile court case between PwC and the administrator of MF Global, a former client of the accounting firm, has been settled halfway through the trial. The court battle, a $3 billion malpractice suit over MF Global blaming PwC auditing errors for the former broker crashing into bankruptcy, was settled with MF Global only having one witness left to present, to an undisclosed but mutually satisfactory amount.

    Commodities Update

    - Saudi exports to US in decline - Gold lower as dollar strengthens With an early morning report that Saudi exports to the US are falling by 300,000 barrels a day, crude prices have moved higher this during European trade giving a brief moment of relief for a market under heavy pressure. Despite the small movements higher, both contracts are set for roughly 2% declines for the week, as stockpiles continue to grow. The decrease in trade between the two nations comes off the back of a sharp increase in US shale production, something which is helping to keep crude prices low. As the dollar regains some strength ahead of the vote in Congress, gold takes a slight hit. However, it remains in a tight range, with politics continuing to lead the way. President Trump allegedly warned that if the healthcare bill is rejected, he is looking to swiftly move onto tax reform, which explains the move higher for the dollar as the tax reforms are presumed to be good for US business. Silver prices have barely moved this morning, as the small move in the dollar is not enough to dent its current position.

    Forex Update

    - Dollar Index pushes higher The Dollar Index moved higher this morning as investors believe the Trump administration may simply move onto tax reforms, should their healthcare bill be rejected later on today by Congress. However, there are still doubts on what a rejection at Trump’s first attempt in Congress could signal for the remainder of his Presidency. Throughout his campaign Trump was pushing for tax reforms and infrastructure spending, policies which gained him strong support. This doubt has helped to keep the Dollar Index below 100, despite today’s move up. In other currency news, the pound has fallen back below $1.25, mainly due to the rise in the dollar. Meanwhile the euro moved back above $1.08 after strong PMI data on the open from France, Germany and the European Monetary Union.

    Upcoming Events

    Amongst today’s significant economic data releases and events we have already had stronger than expected PMI data for the Eurozone, Germany and France. In the afternoon there is CPI out of Canada, all before Congress are expected to vote on the Trump administration’s healthcare bill. Disclaimer: Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. As a marketing communication it is not subject to any prohibition on dealing ahead of the dissemination of investment research, although Spread Co operates a conflict of interest policy to prevent the risk of material damage to our clients.