Updated March 26, 2017 11:11:44

Photo: Investors have moved on in the hope Mr Trump will have better luck with the still-to-be-seen tax cuts. (Trump's America)

US markets closed the week in a reasonably forgiving mood after their "you had one job to do" rage against the Trump administration's failure on healthcare, with Wall Street slipping just a tad on Friday.

That said, the 1.4 per cent fall over the five days trading was Wall Street's worst performance since early November when Donald Trump was only an applicant for the most powerful job on the planet.

Local shares were left in limbo, the ASX SPI futures points to a flat opening — or a one-point gain for the pedantically minded.

Despite having Obamacare in its sights for seven years and the weapon to dispatch it for three months, Republicans on Capitol Hill somehow managed to shoot themselves in the foot instead.

The initial reaction as failure looked imminent on Wednesday was to sell and run — although the 1.2 per cent drop was hardly white-knuckled fear — which now appears to have been replaced by a wary stasis.

While the healthcare failure does not buttress either Mr Trump's reputation as a deal-maker or his stamina in a policy fight, investors have moved on in the hope he will have better luck next time with the still-to-be-seen tax cuts.

Markets hostage to volatile politics

Peninsula Capital's Richard Campbell noted the conniptions this week are likely to be repeated for some time, both here and in the US.

"Wednesday's sell-off may be the first shudder of a prolonged US market shake-out — not a 1987-style collapse, but more likely a series of falls and recoveries over several months," Mr Campbell said.

Both America and Donald Trump have just witnessed the world of difference between business and politics, writes Greg Jennett.

"Despite the obvious negative of a very over-valued US share market, our own remains aggressive on the "risk-on" days (Friday) and scared stiff on the off-days (Wednesday), which makes transacting challenging."

Mr Campbell argued while it may seem counter-intuitive, in these conditions a sharp sell-off is often a positive signal.

"Big players organise dumps to scare both buyers and sellers and then accumulate."

"Trump would approve, that's business."

Given the paucity of fresh data out this week, the US market's focus will again be politics, politics, politics, with the only break from that being an outpouring of Fed-speak.

At last count 13 Federal Reserve officials will be out and about, including Chair Janet Yellen on Tuesday.

New data on investor loans may prompt APRA action

Locally is also a bit light-on in terms of fresh data, although February's Reserve Bank's private sector credit survey (Friday) will be keenly watched given investor lending for property appears to have slipped from under the bank regulator's thumb and is growing rapidly again.

APRA has bluntly told the big banks they are running near the 10 per cent annual growth speed limit for investor loans.

The banks responded by jacking up mortgage rates — particularly for investors — and tightening lending rules.

Another spurt could see the lending speed limit halved to around 5 per cent growth.

Business lending will also be studied closely, but for entirely different reasons.

January was unexpectedly weak, with business credit falling for time in six months.

Another reverse in February's numbers could fuel suspicions conditions are weakening in business, which would be a conundrum for a Reserve Bank worried about excesses in property lending.

Iron ore in retreat

Iron ore endured a savage retreat over the week, down almost 8 per cent including another 1.5 per cent fall on Friday.

Optimists will point to the fact $US85 a tonne is not too shabby and demand in China is still solid.

Pessimists would argue there is a fair bit of speculative betting in the price and iron ore stockpiles around Chinese ports are now a mountainous 130 million tonnes, the highest level since 2004.

The big miners will get a chance to share their views at two respected industry commodity conferences this week.

The Financial Times runs one in Switzerland on Tuesday with the bosses of Rio Tinto and the trading house Cargill speaking, while Perth's annual Steel and Iron Conference (Wednesday) has BHP's iron ore chief pencilled in for the keynote address.

Commodities investors will also be watching the Chinese PMI survey (Friday) to see if the recent rebound in factory activity is still on track.

Bank of Queensland opens up reporting season

Bank of Queensland trots out its 2017 first-half results on Thursday with Morgan Stanley forecasting flat cash and net profits of $178 million and $171 million respectively.

BoQ's results are something of a bellwether for the sector, dropping a few weeks before the banks' first-half reporting season gets cracking in May.

Morgan Stanley is somewhat below the consensus broker forecast, arguing the impact of a shrinking loan book and falling margins are largely under-appreciated by investors.

That said, BoQ jacked up both owner-occupier and investor mortgage rates earlier than its peers and has recently pulled its term deposit rates down, meaning that it may be able to cling on to its precious margins.

BoQ also reported impaired assets fell in the first quarter and a fair bit of interest will centre on whether this trend is maintained or if bad debts start edging up again to more normal levels.

Australia

World

Topics: business-economics-and-finance, australia, united-states

First posted March 26, 2017 11:01:28