Equity markets continue to press on

There is much debate about the rights and wrongs of Trump’s actions to depose the Maduro regime, which I am not going to get into here. From a stock market perspective, given the potential geopolitical implications, the market has just brushed it off. The Vix fear gauge remains close to historic lows, and many would consider it in greed territory.  There was a pretty broad rally in most sectors today; the lagging sector was energy. One scenario markets may be considering is a long-term increase in oil production from Venezuela as a result of Trump’s actions, which would dampen oil prices and, in turn, help stimulate growth and push inflation lower. That is way ahead. Two-year treasury yields have fallen this week, suggesting bond investors are considering the same scenario. The events of the past week have sparked renewed demand for Gold, which, I guess, is not entirely surprising.

The coming days will see a return to economic focus rather than geopolitics. In passing today, we had December’s UK PMI, which came in slightly below expectations at 51.4, slightly above November’s 51.2, but below forecasts of 52.1. The Index reading above 50 suggests the UK economy remains just about expanding. However, pub landlords may have a different view, as would many small businesses. Despite a mixed economic outlook, the UK FTSE 100 has continued to power ahead, particularly helped by the mining sector at the start of the year.

Later on Wednesday, we get a raft of US economic data covering the labour market, the monthly PMI report, factory orders and changes in oil inventories.