FTSE 100 to open 2 points higher at 7440
DAX to open 29 points higher at 12,931
CAC to open 10 points higher at 5360
More records on Wall Street
Asians stocks were strong overnight and European shares look for a positive start on Tuesday following fresh record highs on Wall Street. US small caps have been leading the gains with the Russell 2000 the best performing index. Small US firms should be the biggest beneficiaries of lower corporate taxes and less burdensome regulation. For smaller firms, the cost of compliance with regulations is proportionately higher and they often don’t have the accounting expertise to avoid taxes.
Donald Trump has made some progress toward his plans for tax reform and deregulation. Trump was scheduled to lead a summit on deregulation summit on Monday. Deregulation can have an immediate positive effect on the cost of doing business and is lower hanging fruit for Trump because some of it is executive orders issued by Obama, which he can easily repeal without Congress.
RBA stays put, euro at 6-week low
The euro has sunk to a 6-week low in the Asian trading session. Political upset has returned to the European continent and the euro is the fall guy. From German Chancellor Angela Merkel scraping out an unconvincing win in national elections to the police violence surrounding the referendum in Catalonia. It’s a reminder that even with an impressive rebound in growth, Europe doesn’t quite have its house in order.
The backdrop for the falling euro is a rapidly accelerating uptrend in the US dollar. The dollar shot higher again on following a positive surprise from ISM manufacturing data for September. There was no evidence of hurricane disruption in what was the strongest reading since June 2011.
The Aussie dollar fell on Tuesday morning after the Reserve Bank of Australia kept its cash rate at 1.5%, saying the rate was appropriate according to its growth and inflation forecasts. The RBA made its customary jawboning of the Aussie saying its strength will weigh on the employment outlook and prices pressures. The RBA look content to ride the current US dollar strength toward a more competitive Aussie dollar.
Oil going into reverse
Oil prices have continued the run of poor form over the past few days. The failure to sustain a breakout to new 2017 highs has seen sellers come back into the market in force. A Reuter’s poll showing compliance fell and output rose by 50,000 barrels a day in September among OPEC countries has dented belief in an improving supply outlook. Strength in the dollar has weighed on gold, which has sunk below $1270 per oz.