UK Election, US China Trade War, Euro Stoxx 50, S&P 500 – Talking Points
- European and US stock markets may have strong start to trading day
- US-China trade war progress, UK election helping to buoy sentiment
- Retail sales data from US may amplify volatility, uplift market mood
S&P 500, Euro Stoxx 50 Outlook
The S&P 500 and Euro Stoxx 50 index may wake up with a pep in their step if optimism during Asia’s trading session from the outcome of the UK election and thawing US-China trade tensions spills over. S&P 500 index futures gapped higher and APAC equities rejoiced on the welcome developments. Market mood may be uplifted further if US retail sales data shows a strong print and fends of recession fears.
Euro Stoxx 50, S&P 500 Futures – Daily Chart
Euro Stoxx 50 futures chart created using TradingView
UK Election
The British Pound surged after UK election exit poll showed Prime Minister Boris Johnson’s Conservative Party was expected to win 368 seats out of 650. The share of seats owned by right-wing lawmakers may turn out to be the highest since 1970. Many other districts that had typically voted for the Labour Party – for some since 1922 – had cast their ballot for the Conservative party.
Various Sterling crosses all skyrocketed with GBP/USD climbing 2.40 percent, making it so far the biggest one-day climb in over a decade. The dramatic rise of the British Pound illustrates the magnitude that major political developments can have a currency. Looking ahead, traders will be closely watching how negotiations go and whether Mr. Johnson can secure a Brexit deal and finally end the EU-UK divorce.
US-China Trade War: What Happened?
China and the US have agreed – in principle – to a “phase 1” deal in their multi-sequential trade accord. Washington is expected to not only scrap the December 15 tariff hike but also reduce other levies on Chinese-imported goods. Beijing said it intends on purchasing over $50 billion worth of agricultural goods from the US in 2020 as Donald Trump heads into the election and needs to appease his core constituency: farmers.
US-Retail Sales May Help Push Equities Higher
Advanced US retail sales on a month-on-month basis are expected to have grown 0.5 percent for November, slightly higher than the prior 0.3 percent print. If the statistics meet the pegged figures, it would mark the strongest reading since August. Cooling recession fears and shallow but sentiment-piercing news about improving US-China trade relations has helped buoy consumer confidence and boosted consumption.
Euro Stoxx 50 in Danger of Breaking Uptrend?
The Euro Stoxx 50 index has risen a little over 14 percent since the start of the August uptrend, though that may be in danger of ending. If the pair breaks below rising support, it could open the door for the European benchmark to test the 3571.7-3594.8 support zone. Looking ahead, equity traders will closely be watching major fundamental developments – like the US-China trade war – and its impact on the index’s trajectory.
Euro Stoxx 50 Index– Daily Chart
Euro Stoxx 50 futures chart created using TradingView
S&P 500 Showing Signs of Topping?
The S&P 500 continues to reach new highs and may gap higher early into Wall Street’s trading session. However, technical cues are signaling that a bearish correction may be in the cards. Negative RSI divergence shows upside momentum is ebbing despite the index clocking in fresh highs amid market buoyancy. Looking ahead, traders will be cautiously monitoring the stamina of upside pressure and investors’ confidence.
S&P 500 Futures – Daily Chart
S&P 500 futures chart created using TradingView
S&P 500 TRADING RESOURCES
--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
