Market takeaways from Donald Trump press conference


trump cnnBeneath a Starbucks and next to a Gucci shop, Donald Trump stood at the podium and uttered a request for respite. “Gimme a break,” he said, during his combative press conference in the atrium of Trump Tower.

The dollar, biotechs and shares in Lockheed Martin themselves endured a bruising time on Wednesday and investors were left short on policy details on revving up the US economy.

Instead, much of the press conference was dominated by Russia and the intelligence controversy, and Mr Trump’s business relationships, leaving the so-called Trumpflation trade bereft of fresh impetus for at least a little longer.

Here are the key takeaways for the financial markets from Mr Trump’s press conference.

The stock market gives Mr Trump the benefit of the doubt

Mr Trump’s surprise win produced one of the best post-election rallies in history. Plans to cut taxes, ease regulation and deliver infrastructure spending invigorated an ageing bull market and sent big stock indexes to fresh highs.

Much of that has come on hopes that Mr Trump will be successful in implementing his agenda. Broad indexes largely held gains on Wednesday even though the press conference provided little information on how he plans to push through his proposals or how to pay for them.

“I didn’t hear very many details,” said Randy Frederick, vice-president of trading and derivatives at Charles Schwab. “Eventually the market will expect that.”

The 10-year Treasury saw prices rise during the press conference, before retreating later in the afternoon. But that may well have had more to do with the strong demand seen for the benchmark debt at the $20bn auction that closed at 1pm.

Traders and investors point to Mr Trump’s inauguration on January 20 as the tipping point for investors to begin demanding concrete plans.

“After the inauguration the market will start to expect that and if it doesn’t come forth we may start to see the market show some signs of uncertainty,” Mr Frederick said.

Trump whipsaws the peso, but dollar bulls disappointed by lack of policy detail

The dollar moved lower after the president-elect did not dwell on some of the main economic issues on which currency investors were hoping to get clarity.

While there was a reference to “a very large border tax” to deter US companies moving plants outside the country, issues such as infrastructure spending and tax reform, which have driven the dollar rally since his election victory, were largely absent.

“The word is now out that when you want to move your plant . . . it’s not going to happen that way any more,” said Mr Trump, making reference to Ford’s decision to abandon plans to build in Mexico and Fiat Chrysler’s decision to invest in modernising two plants in Ohio and Michigan. He added that there would be more “big news” about companies building in the Midwest.

The dollar came into the press conference higher on the day, with the index that measures the greenback against a basket of peers 0.8 per cent higher. But by the close of the Q&A, it had pulled back to 0.45 per cent, and fell further to erase the earlier gains.

The euro, at one stage 0.9 per cent lower, was a third of a per cent up on the dollar, while the yen was above Y115.

Steven Englander, head of G10 FX research at Citigroup, said it was a stretch to expect Mr Trump to reveal policy initiatives. “Mention of border charges got the market excited for a bit. Reference to the border adjustment tax would have been a big deal but he didn’t go that far, so the dollar netted out to a tepid gain,” he said.

But Simon Derrick of BNY Mellon said that several mentions about China, Mexico and Japan in the context of trade policy were nods to the difficulties of the US having a strong dollar. “I thought it sounded dollar-bearish at the margins.”

The Mexican peso was pushed to a new low of 22.00 pesos by his comments on bringing car jobs back to the US and his determination to build a wall along the US-Mexico border to halt illegal immigration. But trading was volatile, and the peso gained some support, leaving it 0.3 per cent lower on the day at 21.86 pesos.

Expect volatility for healthcare and defence sectors

Some of the most definitive statements that the president-elect made during the press conference were about Obamacare and drugs.

“Repeal and replace,” Mr Trump said of the Affordable Care Act, adding that his administration planned to move swiftly with a health bill. He also said that he would create new bidding procedures for the drug industry, saying “they are getting away with murder”.

The US is a key customer for the pharmaceuticals industry through its health insurance programmes for the elderly and the poor, called Medicare and Medicaid. The Nasdaq biotechnology index fell as much as 3.9 per cent in tumultuous trading before trimming its fall to 3 per cent.

UnitedHealth, which runs health systems and is a key component of the Dow, fell 0.6 per cent, before staging a recovery and ending the day marginally higher.

“What is the future of healthcare,” said JJ Kinahan, chief market strategist at TD Ameritrade. “That is the question everyone is asking.”

Mr Kinahan added that insurance providers were probably going to be one of the more volatile areas as information emerged about how Mr Trump wanted to rework healthcare in the US.

Lockheed Martin fell 1.7 per cent at one stage as Mr Trump reiterated criticism of the F-35 fighter jet programme. It gained some ground later, closing 0.4 per cent lower. In December, Mr Trump tweeted that the cost of the programme was “out of control”, sending the defence contractor down nearly 4 per cent.

Reporting by Nicole Bullock, Joe Rennison and Adam Samson in New York, and Roger Blitz and Michael Mackenzie in London

The Financial Times