European equity markets are expected to open higher on Monday, tracking gains in Asia overnight where investors appear relieved at the softening foreign policy stance of new US President Donald Trump towards the region.
It’s been a surprisingly good few days for those that were concerned about the relationship between the US under Trump and two of Asia’s powerhouses, China and Japan. It seems that Trump’s stance in relation to both has softened considerably since being elected – at least in public – and he may have adopted a relationship more in line with previous regimes.
This is a big relief for investors given that Trump’s previous stance had raised serious foreign policy concerns, not to mention the prospect of severely damaged trade ties with the region and increased protectionism. Of course, one phone call with Chinese President Xi Jinping is unlikely to have addressed some of Trump’s biggest concerns, around the yuan and jobs for example, and details of what was discussed with Japanese Prime Minister Shinzo Abe are few and far between, but these early signs are at least encouraging.
Given how active he’s been in the early stages of his tenure, Trump is likely to continue to be a big influence in the markets in the weeks ahead. As he settles into the White House and provides greater detail on a wide range of policies, investors should gain a better understanding of what they’re dealing with which in turn should remove some of the uncertainty that is hanging over markets currently.
In contrast to last week, there’s a lot of important economic data being released over the next few days which will give investors something else to think about, although today is looking very quiet on this front. The standout events this week will likely be Federal Reserve Chair Janet Yellen’s appearances before the Senate Banking and House Financial Services committees. These are often highly charged events and may provide more insight on the path of interest rates going forward and the impact the new administration will have on this. Yellen may also be pressed on her future as Chair of the Fed.
