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Global Market Rally Needs Dovish Fed and Positive US-China Trade War Update

Global Market Rally Needs Dovish Fed and Positive US-China Trade War Update

Justin McQueen, Analyst

Analysis and News

  • Cautious Fed Boosts US Equities
  • S&P | Positive US-China Update Needed for 2800

Cautious Fed Boosts US Equities

Yesterday, Fed Chair Powell had echoed similar commentary to Vice Chair Clarida, stating that policy rate is “just below” broad range of estimates for the neutral rate. A notable tempering in the hawkish tone heading into 2019, where the Chair recently stated that the US could face headwinds going into next year. Consequently, rate hike expectations dropped with Fed Fund rate futures pricing in 50bps (2 rate hikes) worth of tightening by December 2019 from 56bps, which in turn, provided a lift to risk assets.

S&P | Positive US-China Update Needed for 2800

With the Federal Reserve providing a somewhat cautious stance in recent weeks, expectations for further rate hikes has decreased, consequently easing concerns over tighter financial conditions and in turn keeping US equities afloat. However, for a return towards 2800, the upcoming G20 summit will be key, where President Trump and Xi are set to meet. A positive update post the G20 summit keep buoy equity markets, although, failure to yield notable progress in the US-China trade war could the S&P back towards 2600. As it stands, the index is struggling to overcome the 38.2% Fibonacci retracement at 2732.

Background of trade wars

  • Impact of Trade Wars, click here

S&P 500 Price Chart: 1-Minute Time Frame (Intraday)

Global Market Rally Needs Dovish Fed and Positive US-China Trade War Update

Chart by IG

US Equity Trading Guide

--- Written by Justin McQueen, Market Analyst

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

Follow Justin on Twitter @JMcQueenFX

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