Wall Street is looking for a solid start to the month after yesterday’s better than expected US Q4 GDP print and renewed optimism over the US-China trade talks. The release of some better than expected economic data early in the European session also coincided with US index futures being given a further leg up, but there has to be a degree of doubt as to whether this current bout of optimism isn’t a little overblown.
Trump has already made it clear that he’s willing to walk away from the table over those China talks in the same way as he did with North Korea. Given the current sticking point with Beijing revolves around Washington’s desire to be the sole arbiter in any enforcement, it’s entirely feasible to see why this deal could collapse.
The US PCE deflator data – the Fed’s preferred inflation measure - is also set for release shortly before the opening bell and again this could provide direction for stocks. The market is currently banking on an end to quantitative tightening being called in a bid to stoke inflation. The side consequence here is that it will also bolster equity valuations. Should the PCE print come in close to the 2% target then this could give fresh downside for stocks ahead of the weekend break.
Ahead of the open we’re calling the Dow up 159 at 26075 and the S&P 500 up 16 at 2800.