A softer Trump picks Wall Street off its lows and lifts European futures
Yesterday was yet another day of choppy trading as investors continued to react to developments in the Trump steel tariff story. The Dow recovered after opening some 300 points lower, as investors were rattled by the resignation of Trump’s economic advisor, Gary Cohn, a calming influence on the President and a fierce opponent to Trump’s tariffs.
Trump softening his stance?
Trading lower to a backdrop of Cohn’s resignation, Wall Street managed to pick itself off session lows, on signs of an unexpected softening of stance by Trump. Suggestions that Mexico and Canada and potentially other countries, on a case by case basis, may be excluded from Trump’s trade tariff was a nod to congressional Republicans and administration officials who feared that the tariffs could hurt allies rather than the intended target, China. The Dow closed down just 82 points recovering from an earlier 300 point sell off. Meanwhile the S&P closed at break even, whilst the Nasdaq managed to push into positive territory.
Trump's potential softening of stance saw Wall Street close well-off session lows, which has transpired into a positive session in Asia and points to a mildly stronger start to Europe.
House prices drop to 5 year low
House prices plummeting to a near 5-year low will ensure house builders are in focus today. The RICS house price gauge fell to 0% in February, well off the 7% forecast and significantly lower than the downwardly revised 7% January print. Brexit uncertainties mean we are seeing those sellers that can wait, holding back from putting their homes on the market, keeping sales numbers subdued and the near-term outlook just as dismal. This news comes hot on the heels of the Halifax price index on Wednesday, which showed the UK hose prices were just 1.8% higher in February than a year earlier, the smallest recorded rise in 5 years.
Looking across the day the central focus will fall squarely on the ECB monetary policy decision, with market participants particularly keen to hear Draghi’s views on the economy and inflation outlook. Whilst no change to policy is expected, a tweak to the forward guidance removing the easing bias could be on the cards, with any broader changes in the statement not due until the summer. Should Draghi marginally adjust the forward guidance, he will most likely put on an extra cautious tone, in an attempt to balance the slightly hawkish move.
There is a lot that Draghi & Co. will need to discuss since the last ECB meeting, which could impact on the euro and inflation outlook and could encourage the ECB to sit on their hands for another month: economic data is showing that momentum is slowing in the eurozone, Trump is on the verge of starting a trade war, Italian elections saw a messy outcome and still lack any real conclusion and on a positive note Germany has finally put an end to its political vacuum.
With expectations riding high for a marginal adjustment to the forward guidance, risks are stacked to the downside. Disappointment could see the EUR/USD pull back to $1.23 or potentially the 50-sma $1.2258. Meanwhile an optimistic Draghi could push the euro back towards $1.25.
Opening calls
FTSE to open 1 point lower at 7156
DAX to open 2 points higher at 12,247
CAC to open 10 points higher at 5197