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Global stocks are finishing a positive month on a mixed note as traders appear cautious about making fresh bold bets ahead of Donald Trump’s speech to a joint sitting of the US Congress later on Tuesday.

The dollar is steady, while gains for perceived haven assets such as Treasuries, the Japanese yen and gold speak to the underlying tentative tone.

Tuesday 08:30 GMT

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The FTSE All World Index, which last week hit an intraday record high of 295.96, is off 0.1 per cent to 294.16, but still eyeing an advance of 2.8 per cent in February.
It is the fourth consecutive month of gains for global stocks, which would be the longest streak since mid-2014.

The rally has been driven by US equities, which make up 53 per cent of the All-World, a 3,077-member index with a market capitalisation of $50tn.

Wall Street’s S&P 500 is up 4 per cent this month, hitting a succession of record highs, as investors have reacted positively to the fourth-quarter corporate reporting season. The Dow Jones Industrial Average, a price-weighted gauge of 30 blue-chip shares, on Monday recorded a 12th consecutive day of gains, its longest winning streak since 1987.

Asian and European equity measures have reached multimonth highs of late, too.
Powering the broad bullishness are hopes that an already improving global economy — there are signs of a pick-up in China and Europe — can be given an extra boost by the mooted policies of new US president Donald Trump.

What to watch

To that end investors are keen to hear Mr Trump’s address to Congress on Tuesday evening in the US, around 02:00 GMT on Wednesday, in which he is expected to detail his fiscal policies, notably infrastructure investment and tax reform.

“News reports suggest that White House officials view this speech as an opportunity for the president to pass the policy baton to Congress with Trump expected to outline key fiscal initiatives for 2017,” said analysts at RBC Capital Markets.

“The consensus is that meaningful tax policy change won’t be enacted until the first half of 2018 and any concrete impact on these expectations from tonight’s speech could be market-moving.”

A perceived lack of clarity surrounding his administration’s economic policies has intermittently hobbled the “Trumpflation trade” that began when he was elected US president in November.

Notably, the ascent of the US dollar has slowed, while government bonds have recovered slightly from their initial sell-off, pushing yields lower.

Fixed income

The yield on the 10-year Treasury, which hit 2.64 per cent in mid-December, is down 1 basis point on the day at 2.36 per cent.

The more monetary policy sensitive US 2-year bond yield is slipping 1bp to 1.19 per cent, even as traders price in a 48 per cent chance of the Federal Reserve increasing borrowing costs next month, up from 36 per cent just a week ago.

Late on Monday, Dallas Fed President Robert Kaplan said that the central bank might need to raise rates “sooner rather than later” to avoid falling behind the curve on inflation.

Helping suppress US yields are the low offerings available from peers. The German 10-year Bund yield is a fraction of a basis point softer for the session at 0.20 per cent as worries about the French elections continue to counteract the recent signs of accelerating economic and inflationary momentum.


Currency moves are muted ahead of Mr Trump’s speech. The dollar index — a measure of the greenback against a basket of its peers — is flat at 101.13 as the euro adds just 0.1 per cent to $1.0594 and sterling eases by 0.1 per cent to $1.2430.

The Japanese yen is 0.2 per cent firmer at ‎¥112.40 per dollar. The currency initially weakened against the buck following the release of data that showed an unexpected contraction in industrial production during January.

The Australian dollar is up 0.1 per cent to US$0.7678 after data showed the country posted its narrowest current account deficit since 2001 in the December quarter. The figures helped quell concerns that GDP data due out on Wednesday could show the country fell into recession for the first time since 1991 during the December half.


US index futures exemplify the market’s cautious mood, pointing to the S&P 500 easing just 1 point from Monday’s record close of 2,369.75.

The pan-European Stoxx 600 is up 0.1 per cent, taking its February advance to 2.7 per cent, while the FTSE Asia-Pacific index eased 0.1 per cent for a month’s gain of 2.3 per cent.

Earlier in Asia on Tuesday, Japan’s Topix rose 0.1 per cent and Australia’s S&P/ASX 200 eased 0.2 per cent as banks and miners had a soft day.
Hong Kong’s Hang Seng fell 0.6 per cent, but China’s Shanghai Composite was up 0.4 per cent.


Energy prices are mixed. Brent crude, the international oil benchmark, is up 0.2 per cent to $56.02 a barrel, while West Texas Intermediate, the US marker, is slipping 0.2 per cent to $53.94.

Gold was up 0.1 per cent at $1,253.46 an ounce, helped by the steady dollar and softer bond yields.

Additional reporting by Peter Wells in Hong Kong

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