Markets to keep close eye on Trump

Petrina Berry
(Australian Associated Press)

Global financial markets have shown a mixed reaction to the start of Donald Trump’s presidency as investors now wait to see if the 45th US president will deliver on his economic promises.

US stocks closed modestly higher on Friday after Mr Trump was sworn in – the first time in more than 50 years a new commander-in-chief has been welcomed by a rising equity market.

On Monday, the Australian share market opened higher, following on from Wall Street’s gains, but had fallen into negative territory by noon. Japan’s market opened sharply lower.

CommSec chief equities economist Craig James said share markets in the Asian session were showing a mixed reaction in the wake of Trump’s inauguration.

However, in Australia, local company announcements had largely overshadowed optimism around the new administration.

“What we are seeing across the globe is investors being watchful,” he said.

“Most of Trump’s promises to reinvigorate the US economy have been priced into markets since the November 8 election and now they want to see legislation put forward.”

AMP Capital Investors chief economist Shane Oliver said investors now would want to see if Mr Trump delivers on his campaign promises to cut corporate taxes, create jobs for Americans and build more infrastructure.

And they would want to see the extent to which he would embark upon on his market-negative policies, such as protectionist moves, and whether he will trigger a trade war with China.

Dr Oliver said that if the new president slapped a tariff on Chinese imports, as he talked about during the election campaign, it could set off a trade war that could affect Australia.

It would take some time for Trump’s key economic policies to be realised, he said, but a failure to deliver on them would pose a major threat to share markets across the world, which have gained ground since the November US election in which Mr Trump claimed victory.

“If he didn’t cut taxes, deregulate and boost infrastructure there would be quite a lot of disappointment in share markets and there would be some kind of setback,” Dr Oliver said.

“It would be hard to know how big that setback would be because the rally after the election wasn’t just on Trump but also on a bunch of other reasons including better economic data from around the world.”


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