Daily Market Color

Global Markets Mixed Following Trump Inauguration

Moments after being sworn into office earlier today, President Donald Trump did little to expand beyond his past rhetoric during the inaugural speech.  Trump’s comments featured many of the same themes promised throughout his campaign, delivering remarks that included “America first” and “buy American and hire American.”  Following the forceful speech by the 45th President of the United States, market demand shifted into safe haven assets, paring a portion of the gains in stocks and reversing the selloff in Treasurys from earlier in the session.  All three main US stock indices ultimately finished up 0.25%-0.50%, while Treasury yields/swap rates fell 1-3 bps across the majority of the curve.  The US dollar declined 0.4% against a basket of major currencies, and gold futures climbed 0.2% on the day.    

Yellen Confirms Gradual Pace
Speaking at the Stanford Institute for Economic Policy Research yesterday evening, Federal Reserve Chair Janet Yellen reinforced her preference to raise rates at a slow pace, stating “I consider it prudent to adjust the stance of monetary policy gradually over time.”  Easing payroll growth and an underutilized manufacturing sector were pointed to as evidence that the Fed’s actions were not past due.  Yellen explained further that weak foreign demand and gradual rate hikes also serve to temper economic expansion in the near term.  However, Yellen did comment that while the economy is not currently “overheating”, there exists considerable uncertainties with regard to future fiscal policies, and achieving the goal of maintaining strong labor markets with stable inflation “will not be easy.”

China GDP Expands in Final Months of 2016
According to China’s National Bureau of Statistics, the Chinese economy grew by 6.8% YoY in the final quarter of 2016, 0.1% higher than expectations and marking the first quarterly rise since mid-2014.  Private consumption highlighted the report, with retail sales increasing 10.9% YoY in December and marking its strongest level in a year.  Consumption contributed nearly 65% to the headline growth in 2016, helping to offset weak global demand for exports.  Looking forward, the Chinese government faces several hurdles in expanding its economy in 2017, including a depreciating yuan, political tensions with the United States, and increase levels of debt. 

Oil Gains as Weekend Compliance Meeting Approaches      
Crude oil prices settled more than 2% higher today as investors look forward to this weekend’s meeting in Vienna, which features several members of OPEC as well as representatives from other major oil-producing nations around the globe, including Russia.  The overarching goal of the meeting is to reach an agreement in creating a compliance structure to ensure that countries are sticking to the output-cutting accord reached last year.  While the actual enactment of the deal has been of primary concern in the past, Saudi Arabia’s energy minister came forward today and stated that the majority of the 1.8 million bpd reduction has already been put into effect.  Today’s rise brought WTI crude to $52.40/barrel and Brent crude to $55.50/barrel, while natural gas suffered a 5% decline following forecasts for a milder winter. 
Have a great weekend.

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