Stocks Hit New Record Despite Few Fundamental Catalysts

Daily Analysis - 12/02/2017

US Equity Benchmarks Close at New Heights

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In a week that much fundamental data was absent, new hints dropped about forthcoming tax reform on the corporate and personal taxes level spurred renewed optimism in US equities and the US dollar as politics dominated the news flow.

Last Week


Politics dominated the headlines last week as Europe faces a slew of new obstacles on the political front.  The rise of anti-EU and populist political movements threatens to unseat incumbent governments in both France and Germany at a time when euro-skepticism continues to accelerate.  Furthermore, Greece splashing back onto the scene is setting up another showdown between the Euro Area and International Monetary Fund.  The IMF continues to call for debt relief and haircuts while Germany refuses to consider any such moves, calling it contrary to the principles set forth by the Lisbon Treaty.

Aside from Europe, both the Reserve Bank of Australia and Reserve Bank of New Zealand opted to keep interest rates at their respective record lows of 1.50% and 1.75%.  The RBNZ continued to work to talk down the Kiwi-dollar valuation as it seeks to restore a higher pace of inflation.  Other important news from Asia included the latest Chinese trade figures, with the surplus reaching a 1-year high as exports and imports rebounded.  In the US, stock benchmarks continued to grind higher amid promises from the Trump Administration that a brand new tax plan will be unveiled in the coming weeks.

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The Week Ahead


Figures pertaining to gross domestic product and inflation will be dominating the headlines in the sessions ahead with most major world economies set to report on fundamental developments.  Kicking off the week is the preliminary reading of Japanese fourth quarter GDP, which is forecast to come in at 0.30% for the last three months of 2016.  The Euro Area and Germany will also be reporting comparable figures throughout the week.  EMU data is expected to remain unchanged after the first reading of fourth quarter GDP whereas the advance reading of the German figure is expected to show an acceleration in economic activity.

Apart from growth figures, consumer price inflation data will be released from China, the United Kingdom, and the United States.  All three are expected to show additional gains, extending the trend of the last few months following a resurgence in energy prices globally alongside the deep depreciation of the UK Pound and Chinese Yuan.  Any upside in the US figure could pave the way for further gains in the US dollar as certain FOMC members float the possibility of March being a “live” meeting.  To cap off the week, UK unemployment rates will be announced before retail sales figures are set to be delivered from the US and UK.

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