“Everything Is A Partial Reversal Of Yesterday” – Stocks, Dollar Rebound Following Trump Scare

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European shares decline led by a plunge in Pearson shares, S&P futures were modestly in the green as Asian and EM stocks gained. The dollar rebounded against most major currencies after retreating 1.3% on Tuesday to the lowest in a month following Trump’s “strong dollar” comments and halted a seven-day drop against the yen.
Asian traders said shares were helped by hopes that the concerns about a stronger dollar expressed by the U. S. President-elect at the weekend, would be beneficial to emerging markets where companies have borrowed heavily in dollars. Asia’s MSCI’s ex-Japan Asia-Pacific shares index rose 0.3%, just shy of a three-month high hit last Thursday. Energy and cyclical stocks were the chief gainers. Short-covering also helped, especially in China where stocks tumbled more than 4% last week as traders took some money off the table before Trump’s inauguration on Friday. European stock markets were fractionally in the red steady after a choppy start, banking shares under pressure as investors chewed over details of the impact of regulatory fines on Deutsche Bank.
“You’ve seen the banks ease, everything has taken a breather after the strong start in January for stocks,” Andy Sullivan, a portfolio manager with GL Asset Management in London told Reuters. “The last few days have been choppier and for the rally to be sustained, we need to see earnings growth start to come through.”
The Yen and gold retreated for the first time in eight days. Bonds edged lower before Thursday’s ECB meeting, where few surprises are expected. Oil reversed course after earlier gains, slipping below $52 a barrel. Sterling, which soared more than 3 percent on Tuesday after Prime Minister Theresa May’s Brexit speech, fell back 0.7 percent.
“Everything is just a partial reversal of the price action yesterday,” said RBC Capital Markets currency strategist Adam Cole, arguing that the greenback’s weakness had been primarily driven by excessive positioning at the end of last year.

This post was published at Zero Hedge on Jan 18, 2017.