The XJO is expected to open higher this morning following a strong rally in the U.S overnight. Their GDP was worse than expected, likely giving their market hope that rate rises will soon end.
Our expected rally this morning will be relatively muted compared to what we saw from the U.S. This is largely because we also did not fall as aggressively either, and U.S futures have edged into the red this morning. Our market will simply continue to trade in the consolidation range whilst the U.S sorts out their next move.
US Markets
US shares rocketed higher overnight after US GDP came in much weaker than expected. This is a deflationary sign and could given reason for the Federal Reserve to pause interest rate rises when they meet next week. Pending home sales also declined by greater than expected, supporting the slow-down narrative. Company earnings reporting also remained strong, with Meta (Facebook) jumping strongly on the back of their report. Tonight, we will see US PCE price data, which will also fuel the discussion around whether we will see a Fed rate rise next week. In general, markets are fairly confident we will see one more rate rise from the Fed in May before they pause the rate rises.
Every major sector of the SP500 closed firmly higher overnight, with Communications by far the best performers after the big jump from Meta Platforms. Real Estate, Discretionary, and Technology stocks also fared well, while most sectors saw a greater than 1 percent rise.
Yesterday the SP500 broke below a support level but overnight fundamental news pushed it back above. The index now looks like heading to the recent high around 4,160 index points. Should that break, we could see a move towards 4,200. Should the index fall from here, it will have to close below 4,070 before further selling looks likely.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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