US Futures advance while investors await any new development on the on going trade negotiations between the US and China
The US futures are looking solid today because investors are hopeful that Trump will use his televised address as an opportunity that the government is ready to break the current shackles. If Trump is able to break the current government shutdown, we could see some more gains for the US indices. So far, the S&P 500 index is up 1.75% year to date, the Dow Jones has jumped 0.87% and the NASDAQ index has soared the most with a gain of 2.84%. Clearly, the tech sector is driving the moves once again.
Stocks in Europe are trading higher and this is despite the fact there is no clear outcome from the fresh talks which are taking place between the US and China over the current trade war. It appears that traders have already priced in a lot of good news and the only outcome they are expecting out of this is mostly positive. Trump administration is oozing optimism and they are hopeful that a reasonable deal will be done with China. The dollar index has clearly broken its three days of sell-off and resumed its upward trend while the move in the Treasury market over in the States is mostly steady.
The bigger question for investors is if the current momentum will continue as the earning season could change everything. Well, it is true that the earning season could change everything if there are any adverse changes in the future outlook. If the only concern is about the US and China trade war, then there may not be that much of problem because of Washington and Beijing are likely to put this issue behind them. However, if the sentiment still doesn’t show any sign of confidence and investors remain worried because of the change in the monetary policy of the Fed and lack of any bullets left in Trump machine gun to stimulate the economy, then we have a bigger problem.
Back in the currency market, traders are focused on the fact if the Prime minister is going to water down the current threat of the UK thrashing out the EU without any deal. She is going to put her deal to a crucial vote in parliament next week and it is widely expected that she is going to lose this vote as we said yesterday. No deal is not better than a bad deal but the prime minister thinks the only way to get things her way is to put pressure by saying that this is the only deal and there is no other alternative.
As for the commodity market, crude oil is holding above the $48 level or in other words, we are experiencing the longest rally in nearly one year and six months. Of course, the reason behind the current move is the positive mood about the ongoing trade negotiation between the US and China. As long as we get a reasonable outcome from the current negotiations between the US and China, the path of least resistance for oil could be to the upside.