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S&P 500, FTSE 100 Outlook: Trade War Deadline, Brexit Vote, Fed Powell Testimony in Focus

S&P 500, FTSE 100 Outlook: Trade War Deadline, Brexit Vote, Fed Powell Testimony in Focus

2019-02-24 10:00:00
Justin McQueen, Analyst
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SPX500 Chart

Equity Analysis and News

  • S&P 500: Critical US-China Trade Talks as Deadline Nears
  • FTSE 100: Brexit Continues to Dominate

Looking for a technical perspective on the Equities? Check out the Weekly Equities Technical Forecast.

Equity Chart

Source: Refinitiv

S&P 500: Critical US-China Trade Talks as Deadline Nears

S&P 500 saw a modest 0.3% gain in a somewhat subdued week for US equity markets, where markets participants had been somewhat indecisive with global uncertainties continuing to cloud the economic outlook.

Next week we see focus fall on the US-China trade talks as we near the March 1st deadline. As it stands progress towards reaching a deal continues to be made. However, with issues remaining, it is unlikely that a deal will be made, but rather an extension to the tariff deadline. Given the continued upside in equity markets, this may be somewhat priced in already, as such, key resistance at 2800 for the S&P 500 may hold for now.

The semi-annual testimony from Fed Chair Powell will of course garner attention for the equity markets. As a reminder, the main sticking points from the Fed meeting minutes were that the central bank will be patient with rate hikes, while the balance sheet unwind may come to a halt by the year-end. However, judging by Fed Fund future pricing, markets may be somewhat complacent by calling an end to the hiking cycle and implying a 55% likelihood of a cut by Jan 2020. As such, commentary from the chair suggesting that the Fed could continue to raise rates if the economy evolves as he expects, may spark a pullback across US equity markets.

Equity Chart

Source: Refinitiv.

Elsewhere, US data will also grab some attention, particularly the ISM Manufacturing PMI report. After this week’s Philly Fed Business Activity data, in which the headline figure heavily missed analyst estimates, falling to its lowest level since May 2016, risks are skewed to the downside.

Equity Chart

S&P 500 Price Chart: Daily Time Frame (Aug 2018 – Feb 2019)

SPX 500 Chart

FTSE 100: Brexit Continues to Dominate

The FTSE 100 underperformed relative to its major European counterparts, with the index notably softer having failed to make a firm break above topside resistance at 7250. Brexit is undoubtedly the main theme for UK assets in the upcoming week, whereby PM May will make a statement on February 26th on the progress (or lack of) regarding Brexit talks. Consequently, another vote may take place on February 27th which could give parliament another opportunity take control of the Brexit progress and force an article 50 extension. As such, UK assets are likely to see choppy price action amid the abundance of headline risk.

FTSE 100 Price Chart: Daily Time Frame (Feb 2018-Feb 2019)

FTSE100 Chart

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--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

Other Weekly Fundamental Forecasts:

Australian Dollar Forecast – Australian Dollar Market May be Calmer, But Watch Trade Headlines

Oil Forecast – Crude Oil Prices Risk Overbought RSI Signal Despite Record U.S Output

British Pound Forecast – Sterling Refuses to Believe in No Deal Brexit

US Dollar Forecast – US Dollar Eyes Powell Speech, US- China Trade Talks, Data Deluge

Gold Forecast – Gold Price Rally May Stall on a Trade War Resolution

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