Business World

Wednesday 25 April 2018

Trump reality saps 'Trump reflation'

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York
Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York

Investors turned more realistic about US President Donald Trump's policies, shrugging off solid economic data that bolstered prospects for the region's equities.

After rising in December and November in anticipation of a big fiscal stimulus under the new US administration, the pan-European STOXX 600 index ended January down 0.4pc. Confidence has waned after the inauguration and President Trump's initiation of controversial and protectionist policies.

"The Trump reflation story came in with a lot of hype but actually when he came in we're seeing a much more dislocated agenda and the outlook for some of the more bold fiscal-focused plans seems to be much more complex than expected," said Peter Rosenstreich, head of market strategy at Swissquote Bank.

After a volatile day on Tuesday, the STOXX fell 0.7pc to a one-week low even though data yesterday showed eurozone inflation had risen to just below the European Central Bank's target, economic growth was accelerating at greater speed than in the United States, and unemployment has hit a more than seven-year low.

In Dublin, the Iseq closed down 0.76pc at 6,392.39.

"While you're having this noise of Trump, Brexit and political instability you have quietly a European economic recovery: the GDP numbers today were strong, inflation continues to pick up," Rosenstreich said. "On a valuation basis we believe that European stocks should outperform US stocks."

Credit Suisse lifted its year-end target for the Euro STOXX 50 to 3,450 from 3,300 points, noting how the ECB was likely to remain dovish until at least the aftermath of the French elections in the spring.

Reuters

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