March is off to a strong start for stock markets around the world. US index futures are up 0.4% to 0.6% with the NASDAQ leading the charge. Overseas markets have been even stronger with the Nikkei and Dax both up 1.4% and the FTSE up 1.0%.
President Trump's speech to Congress was well received by the markets. His tone was more positive and forward announcing plans for a trillion dollar infrastructure plan using public and private money, He also committed to increased defence spending, health care and tax reform and other initiatives. He kept the sabre rattling to a minimum and spoke positively about the points based immigration systems in Canada and Australia.
The devil, as always, is in the details. With big promises made, the focus now shifts to getting all of these initiatives passed through Congress, funded and implemented. In other words, the real work starts now. In the coming days and weeks, the sorting process of figuring out what to spend where and when begins, and we'll start to figure out what can be done this year and what could get pushed off to future years. Eventually the market will need details for forecasting. It remains to be seen how long traders' patience will last but for now the trend remains upward until it breaks.
Currency markets have also been active overnight. The U.S. dollar is up on a combination of speech reaction and comments pointing toward a potential March rate hike from NY Fed President Dudley, one of the Big 3 FOMC members, and SF Fed President Williams. St Louis Fed President Bullard, meanwhile, talked about wanting to start running down the Fed's balance sheet.
USD soared in particular against JPY and gold with EUR and GBP also taking hits. Sterling is having a mixed day, down against USD, steady against EUR and up against JPY amid talk the House of Lords could amend the Brexit bill and a soft UK manufacturing PMI report. AUD has been holding its ground on the back of stronger than expected Australian GDP and manufacturing PMI reports.
CAD fell only marginally against USD overnight but had already taken a big hit during the day yesterday ahead of the Trump and Fed speeches. The loonie could be active around today's Bank of Canada decision. While the Canadian economy has been doing well, comments at the last meeting from Governor Poloz about being ready to cut interest rates if U.S. actions on trade sideswipe Canada were seen as a dovish surprise.
Since the last BOC meeting, PM Trudeau, External Affairs minister Freeland and Finance minister Morneau have all been to Washington to meet with their counterparts in the new administration. It will be interesting to see if Governor Poloz changes his tune in light of these meetings and the lower loonie.
Crude oil may also attract some attention today. WTI is trading up slightly despite a 2.5 mmbbl increase in API inventories. Today, DOE inventories are due mid-morning.
Amid all the hoopla of the big speeches. There has been a ton of other data that could influence trading. Chinese manufacturing PMI reports were better than expected with reports for the U.S. and Canada due mid-morning. U.S. construction spending and the Beige Book are also due. Earnings reports for Lowe’s (NYSE:LOW) and Best Buy (NYSE:BBY) in the U.S. plus National Bank in Canada were both well above expectations. Reports this week and next may be viewed through the lens of whether they increase or decrease the chances of a March Fed rate hike.
Speeches from Fed Chair Yellen and Vice Chair Fischer Friday may attract particular attention. Comments this week from Fed Governor Brainard could also be of interest. She was particularly close to the Obama administration, so it will be interesting to see if she is still as dovish and if her opinions still carry as much weight with the street as they did before or if she is getting marginalized as the Fed turns more hawkish.