Monday: US NY Empire State Manufacturing, JN-US Trade Talks (2 Days)
Tuesday: AU RBA Meeting Minutes, CN House Prices, UK Unemployment Rate, Employment Change, Claimant Count Change, Averages Earnings Incl & Excluding Bonus, GE ZEW Current Conditions & Sentiment, EU ZEW Economic Sentiment, CA Manufacturing Sales, US Redbook, Capacity Utilization, Industrial Production, Manufacturing Production & Weekly API Inventories, NZ CPI.
Wednesday: JN Trade Balance, Exports & Imports, Capacity Utilization & Industrial Production, CN GDP, Industrial Production, Retail Sales & Unemployment Rate, IT CPI, UK CPI, PPI Output & Input & House Price Index, BOE Carney Speaking, EU CPI & Trade Balance, OPEC Meeting (cancelled until June), US Exports, Imports & Trade Balance, Wholesales Inventories, Weekly DoE Inventories & Beige Book CA CPI, Imports, Exports & Trade Balance.
Thursday: AU Manufacturing & Services PMI, Employment Change & Unemployment Rate, GE/FR/EU PPI, Composite, Manufacturing & Services PMI, UK Retail Sales, US Retail Sales, Philly Fed Manufacturing, Manufacturing, Composite & Services PMI, Business Inventories, CA ADP Nonfarm Employment & Retail Sales.
Friday: Good Friday Bank Holiday, JN CPI, US Building Permits, Housing Starts & Baker Hughes Rig Count
S&P 500 & US Equities
It feels as if it’s a matter of when and not if the S&P 500 will reach a new all-time-high. The Dovish FED and foreign central banks alike have led to a strong global equity rally since late December which doesn’t seem likely to stop quite yet. Positive Trade Talks between the two biggest economies in the world coupled with a strong recovery in the oil market have helped push these markets close to their peaks which we saw last in October 2018.
What will get us over the line? Simply put, a continuation of what we have seen since December 26th. Sentiment is so strong to the upside at the moment that every dip provides a good opportunity to buy, much reminiscent to 2017 where the market grinded higher and higher.
The last key resistance for the S&P will be the reaction we see once we get to the highs, but it’s worth noting the potential risks that limit a further push over the coming days and weeks. Oil price seems to have hit a short-term ceiling which could halt progress with the highly positively correlated equity markets as well as earnings kicking into focus. How good or bad will be of significant interest to the market.
Trade talks for the US with the EU and Japan are set to begin which will start to grab investors attention but it might be too late to stop us reaching a new high across the US Equity board.
The next FOMC interest rate decision is on May 1st and yet again, Donald Trump gave his 2 cents on the damage the FED have done to his beloved equity markets. While the market will likely expect them to be dovish in a couple of weeks, I would just like to bring to your attention what happened to the markets the last time Tiger Woods won a major. Stocks fell 45%...... Is it time to actually take profit? Decision time.
WTI Crude Oil
When I look at this chart from a technical point of view it just screams ‘resistance’. The lows from June and August last year, with the $65 handle seem like a perfect place where people will take profit and thus, we can expect to see a push lower. The next question is whether we can then start to move up to the high of the year and beyond? We can expect more frequent comments from Trump on the price of Oil being too high but whether OPEC and Saudi in particular will give in to Trump’s calls will be a factor in determining the next steps for the commodity.
OPEC’s meeting has been pushed back to June as they wanted time to weigh up the impact that US sanctions had on both Venezuela and Iran. With the Supply Deficit confirmed last week from all the major energy bodies, the fundamentals still swing to the upside. I would expect a short-term top from last week’s high before we get a further push to the upside in the coming weeks.
With Easter fast approaching, the UK government, from last Thursday are on a break until April 23rd. I wouldn’t expect too many new developments to take place in the coming days so for once, this market might just behave itself technically. A technical break below the April and March lows would be very key and could lead to a quick push lower. On the other hand, a break of the trendline could see the opposite reaction and we may see a relief rally after getting squeezed to the downside since the 13th March.
Key questions going forward will be focused on what May and Corbyn can achieve, whether that would pass in parliament and then whether the EU would even accept the changes. Everything seems still very much up in the air and with the new October 31st deadline agreed last week by the EU and UK, you would be quite brave to say with confidence everything will be sorted by then!
Over the weekend the Telegraph reported that a predicted seat change from the 2017 General Election would give Labour the majority over Conservatives. Any talk of a GE being called will initially add more negative sentiment to the market as the uncertainty increases.
A decent start to last week for Gold until Thursday wiped all the gains away. A slightly more hawkish FOMC minutes on Wednesday evening was touted as the reason the precious metal struggled to sustain its good start to the week but in truth – the Dollar wasn’t that strong across the board. From a technical point of view, I think the 23rd January low is still an interesting area along with the 0.382 Fibonacci level from the 2018 low to 2019 high.
I hope you all have a great week and any questions please feel free to let me know. Also, if you missed this morning’s briefing then please click HERE
Have a great week!
Sam North – Senior Associate @snorth19
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