Biden Irks Wall Street with ‘Consumer Friendly’ Nominations
…the Obama administration were also seen as anti-Wall Street (by Wall Street) yet that did not prevent the stock market breaking to new highs amid its longest bull market in history.
Clouds appear to be forming over Wall Street after Job Biden’s team said it planned to nominate two candidates for top financial positions, who are deemed to be too consumer friendly and lean too far left. Republicans were quick to criticise their picks and warned the move would be divisive.
Gary Gensler, a former investment banker, Wall Street regulator and currently a professor at MIT (Massachusetts Institute of Technology) is to be put forward to be chairman of the SEC (Securities and Exchange Commission). He is not likely to be popular with Banks as he’s expected to impose aggressive regulation on financial institutions and companies. Which is basically the complete opposite to what President Trump advocated (no regulation, and higher stock markets).
Rohit Chopra is to be nominated to head the CFPB (Consumer Financial Protection Bureau). Considered to be a consumer advocate and has previously been involved in trying to reform the student loans system in the US, he is not likely to be favoured by Republicans. But can it topple the stock market?
Given the low interest rate environment and eye watering levels of fiscal stimulus, its unlikely to take the heat out of the stock market rally. Initially at least. But regulation, especially too much of it, can hamper animal spirits and we can expect plenty of lobbying to try and push back on these nominations over the coming days. But even if their nominations are to go ahead, it should be remembered that the Obama administration were also seen as anti-Wall Street (by Wall Street) yet that did not prevent the stock market breaking to new highs amid its longest bull market in history.
S&P 500 E-mini futures are trading 6.25 points higher (+0.17%) having found support at the 20-day eMA. Nasdaq-100 E-mini futures are 0.23% higher.
Chinese Growth Accelerated into the Year End
…there is a more than reasonable chance growth could accelerate further in Q2 2021 due to what is known as the ‘basing effect’.
China’s GDP (growth domestic product) accelerated by 6.5% YoY in Q4, according to data released by the National Bureau of Statistics of China. Given it contracted -6.8% in Q1 as the world grappled with the onset of COVID-19, this is no small feat. However, there is a more than reasonable chance growth could accelerate further in Q2 2021 due to what is known as the ‘basing effect’. As nominal growth was negative in Q1 2020, any apparent YoY rate for Q1 2021 will be effectively amplified when compared to the -6.8% contraction, so we may even see double digits next quarter. For that reason it is best to note the quarterly figures. For Q4 2020 China’s GDP picked up by 2.6% versus 2.7% in Q3, which is still strong despite the turbulence on 2020.
The China A50 index (CN50) rallied 0.8% with an intraday high of 1.5%. The Yuan weakened against the US dollar, helping USD/CNH to rise to a 11-day high.
New Zealand Business Confidence Hits a 2-year High
…it further adds to the argument that RBNZ will not implement negative interest rates.
New Zealand’s business confidence rose to its least pessimistic level since Q3 2017. Just 6% of firms surveyed now expect conditions to deteriorate, which is a significant improvement from 70% in Q1 and 40% in Q2. Given that RBNZ were less pessimistic about New Zealand’s economy in November’s meeting as they introduced a fresh round if stimulus, it further adds to the argument that RBNZ will not implement negative interest rates.
Yet it wasn’t enough to lift NZD/USD which closed to a 14-day low overnight. NZD/JPY extended its correction and currently down -2.5% from its highs, and is now below is 200-bar eMA on the H4 chart. The next major support level is the 50-day eMA at 73.33.
The dollar’s retracement lost steam overnight, with the US dollar index stalling at its 50-day eMA and closing back beneath its 20-day Bollinger Band. But then volatility was lower due to its being Martin Luther Kong Day in the US, as trading activity was significantly lower. EUR/USD hit our 1.2160 target and also closed the session with a small bullish hammer at key support. USD/CHF has so far struggled to break above its neckline from the inverted head and shoulders pattern, and produced a small bearish hammer which closed back below 0.8920 resistance. Hopefully volatility will increase today as US traders return to their desks.