Equities Rally As Trade Tensions Ease
Wall street rallied hard at the start of the new week, as trade war fears eased, following reports of progress in behind the scenes talks between China and the US. A healthy number of countries have now been granted exceptions from US steel and aluminium trade tariffs and now it is starting to look as if China could be joining them. With the US handing out so many exemptions markets are starting to question whether Trump ever had any intention of heading into a trade war with China. Or, whether this was simply tactic to increase leverage in trade discussions, with the world’s second largest economy, as Trump merely looks to fulfill a campaign promise.
Whatever the intention, the Chinese offering to buy more semiconductors from the US, to help cut its trade surplus, not only eased trade war fears boosting sentiment, but also gave an injection of life into downbeat technology stocks and financials.
The Dow closed over 650 points higher, whilst the S&P bounced off its 200 sma, jumping 2.7% led by technology stocks and financials. The Nasdaq closed an impressive 3.3% higher. Microsoft (NASDAQ:MSFT) was a standout performer jumping 7.6%.
European bourses are pointing to a strong start, taking the lead from a strong finish on Wall Street and a positive session in Asia. After a strong sell off last week and a negative start to this week, the FTSE could try to take back 7000. Financials are expected to move firmly higher and strong metal prices overnight could see the heavyweight miners perform well.
Dollar dives on Russian woes
Despite US equity indices surging, the dollar continued to suffer from political woes; this time from Russia. The US have expelled 60 Russian diplomats in a coordinated move with European governments and NATO allies, punishing the Kremlin for is suspected involvement of the poisoning of an ex-agent on British soil.
The dollar has had no chance to catch its breath from last week’s trade war fears before being lurched into another geopolitical headache. The dollar trended firmly lower versus a basket of currencies, shedding 0.5% across Monday, testing support at 89.00, whilst hitting its lowest level in over a month.
US Consumer confidence data
Today, investors will cast a glance towards the release of consumer confidence data, although it is worth noting that this reading is unlikely to overshadow sentiment. The markets will be looking for a repeat performance of February’s print, when consumer confidence surged to its highest level since 2000. Increased disposable income from tax cuts, a roaring jobs market and low inflation are all supportive of another increase in March, to the 131 expected, from 130.8 in February.
EUR/USD aiming for Feb high’s
Both the pound and the euro were quick to capitalise on the softer dollar in the previous session. EUR/USD reached $1.2450 overnight, its highest level since its mid- February high of $1.2554 as political woes keep the dollar under pressure. Continued weakening of the dollar could see the pair attack resistance at $1.2480 before targeting February’s high of $1.2554.
GBP/USD to retest $1.4345?
A Brexit transition deal, optimism surrounding a May rate rise and a weak dollar propelled GBP/USD to an 8-week high of $1.4244, its third highest level since the Brexit referendum. With no high impacting releases until later in the week, the dollar will be the main driving force in the pair. More political headaches for the buck could see traders retest $1.4345.
Opening calls
FTSE to open 82 points higher at 6970
DAX to open 178 points higher at 11965
CAC to open 60 points higher at 5126
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