Dollar, oil slip as Trump effect, OPEC deal hopes fade

28 Nov 2016


The dollar and US bond yields fell on Monday as investors reversed a "Trumpflation" trade that has gripped markets since the US elections, after oil prices slid on fears that producer countries meeting this week could fail to agree an output cut.

Brent crude futures last traded at $47.13 per barrel LCOc1, down slightly on the day, after having fallen by as much as 2.0 per cent in early Asian trade, following on from a 3.6 per cent fall on Friday as doubts arose over whether the Organization of the Petroleum Exporting Countries would reach a deal later this week.

Prospects of reduced upward pressure on inflation from oil prices, prompted investors to temper expectations for rises in US interest rates, bring down treasury yields and the dollar.

That gave some relief to Asian shares, which had underperformed on worries about capital flight to higher-yielding US markets in the weeks since Donald Trump's 8 November election win.

MSCI's broadest index of Asia-Pacific shares outside Japan  rose 0.6 per cent, led by gains in Hong Kong and Taiwan.

In contrast, US stock futures ESc1 slipped 0.2 per cent after their stellar performance this month on hopes President-elect Trump's policy of fiscal spending, deregulation and protection of domestic industries will boost US inflation and benefit Corporate America.

European shares are expected to dip, with spread-betters looking at a fall of 0.2 per cent in Germany's DAX and 0.1 per cent in Britain's FTSE .

 Japan's Nikkei average, which had performed even better than Wall Street thanks to the yen's fall, ended down 0.1 per cent.

"It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump's policy may not be so good after all," Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets, told Reuters.

Wall Street's four main indexes all hit record highs last week, a feat last achieved in 1999.

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