US Futures Mixed, Major Sector Rotation Taking Place

Posted by Naeem Aslam | 05/12/2017 12:25

The European technology sector is mimicking what happened over on Wall Street
UK and EU walked away yesterday without having any deal
Spanish industrial number painted more cheerful painting

US futures are mainly focused on any new development on the US reform. Markets have priced in the impact of the US tax reform to a large extent, despite the fact that these changes are yet to be signed by President Trump and become a law. The fact is that the road for these changes to become a law isn’t that smooth yet and any bumps could bring some shocks for investors. The European technology sector is mimicking what happened over  on Wall Street. A major sector rotation is taking place. Money is coming out of technology sector and moving in those sectors which are going to be the beneficiary of the US tax overhaul. Hence the performance of the US financial and energy sector has anchored during the past few days.
After yesterday's breakdown in the Brexit negotiations, we aren’t experiencing much enthusiasm for the risk on trade over in Europe. Both sides walked away yesterday without having any deal. Investors were optimistic that both sides will able to sign a deal for the U.K. leaving the European block.
The uncertainty around the first phase of Brexit negotiations has brought more than usual volatility for Sterling. Fairly recently, the heavy sell off in sterling has come off from its peak, triggered by the fear that the deadlock in Brexit negotiations isn’t going anywhere and the optimism around it was over inflated. The UK services data is also having an influence on sterling today as it confirmed that the services sector is picking up some chill and inflation has further accelerated- a combination which is fatal for the UK's economy.
Over in Europe, the Spanish industrial number painted more cheerful painting for the Spanish economy. The economy is gaining more momentum, thanks to the broad rebound in the eurozone economy. Countries like Greece have also started to perform much better. The most encouraging element is that the strife in Catalonia hasn’t left any catastrophic impact on the region. We also had the European retail sales data which showed that shoppers were not generous towards their shopping habit in eurozone during October. However, we only have a modest drop of 0.5 percent.

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