Monday, January 30, 2017

Why Donald Trump is starting to worry Wall Street – Le Figaro

Between a monetary policy meeting of the federal Reserve, the monthly employment figures and a new round of corporate results, analysts have already been busy this week. But their attention is still focused on the politics of the new american president, and the surprises that it may still reserve. A sign of these concerns, the dollar had risen sharply against the euro gave up a little ground in the last few days.

Donald Trump could indeed have a stronger influence than Janet Yellen, the chairwoman of the powerful Fed that the economic indicators or even as corporate profits on Wall Street. The market “has already incorporated the fact that the economic recovery was installed, and that the Fed would begin to become more restrictive. It has not yet been identified, it is the personality Donald Trump,” explain the analysts of Per Stirling Capital Management.

If the equity markets have benefited greatly from the 8 November, the hopes of tax breaks and fiscal stimulus promised by Donald Trump, investors now seem to doubt it. Some wonder about the impact of the protectionist measures put in place with respect to Mexico . The white House says it wants to impose a tax on products imported from Mexico to finance the construction of a wall. But such a tax would disrupt entirely the relations with the neighbouring countries of the United States, and would necessarily lead to inflation, which could lead the Fed to give a shot of brake faster than expected in its monetary policy. Another source of nervousness: relations more tense with China. The investors would prefer that the president enter into negotiations with Beijing to try to gain concessions, rather than increasing the loudness in what is stated.

In Europe, the anxiety grew stronger and stronger also. Donald Trump has become a threat for the stability of the european Union, has estimated this Monday, Guy Verhofstadt, commissioned by the european Parliament to negotiate the “Brexit” with the british authorities. “I have just returned from Usa and I have the feeling that a new front is opened in order to destabilise the EU… and this is Donald Trump,” said the former belgian Prime minister.

The Fed raises fewer concerns

The Fed also raises fewer concerns: in their vast majority (96% consensus) analysts believe that the institution should keep its interest rates unchanged after its monthly meeting. But as usual, the market will sift through the press release of the central bank. If the language used suggests rate increases faster than anticipated, “the rally on the shares could mark a pause,” according to Wells Fargo Investment Institute. But like many of us, the Fed waits, probably to see what will come out of all new policies and changes that we can expect from the new administration,” says a manager for U.S. Bank.

The robustness of results has largely contributed to the market rebound. However, several heavyweights of the rating must disclose their accounts in the days to come, such as Apple, Exxon Mobil, General Motors or Facebook. Financial analysts are forecasting currently on an increase of 6.8 per cent of the profits of the S&P in the fourth quarter compared to the same period of 2015, compared with 6.1% on the 1st of January, according to data from Reuters.

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