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S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

Research, Research Team

S&P 500, CHINA A50, GOLD PRICE OUTLOOK:

  • The S&P 500 index climbed 0.5% to 3,115, boosted by ISM manufacturing PMI and vaccine hopes
  • The China A50 Index soared 3%, rallying on rate cuts and upbeat manufacturing PMIs
  • Gold prices saw a technical pullback from US$ 1,789, but the overall trend remains bullish

S&P 500 Index Outlook:

The S&P 500 Index climbed for a third straight day to 3,115, thanks to a much better-than-expected ISM manufacturing data and Covid-19vaccinehopes. A clinical trial of a coronavirus vaccine candidate showed promise, according to Bloomberg news. The ISM manufacturing PMI jumped to 52.6 in June, smashing the consensus forecast of 49.5 and firmly entering into expansionary territory (chart below). This helped to boost market confidence against the backdrop of mounting virus concerns. It is worth noting that several US states have called to scale back in re-opening plans as virus cases resurged sharply.

Manufacturing sentiment in the US, China and South East Asia released this week has largely beaten market forecasts, which suggests that an initial recovery in output is perhaps stronger than people would have thought. This helped to paint a rosy view of the global recovery. However, the road ahead may remain bumpy with virus uncertainties and a complicated US-China debate over Hong Kong.

The index today may struggle to gain momentum as traders await the non-farm payroll report ahead of a long weekend. US markets are shut on 3rd July for the Independence Day holiday.

S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

Sector wise, while the S&P 500 index climbed 0.5%, only 42.2% of companies ended higher last night. Defensive real estate (+2.57%), utilities (+2.29%), communication services (+2.24%) and consumer discretionary (+1.76%) were among the leading gainers, whereas energy (-2.49%), financials (-1.04%) and industrials (-0.48%) were lagging behind.

S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

Source: Bloomberg, DailyFX

S&P 500 Index –Technical Analysis

The S&P 500 Index remains in an ascending channel on its daily chart, with immediate support and resistance levels found at 3,030 (20-Day SMA) and 3,187 (161.8% Fibonacci extension) respectively.

S&P 500 Index – Daily Chart

S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

FTSE China A50Outlook:

The FTSE China A50 index soared 3% yesterday following the PBoC’s decision to slash both the relending and rediscount rates by 25 bps to bolster small business and rural sectors hit by Covid-19 epidemic. A solid Caixin manufacturing PMI reading also boosted equity trading sentiment.

Technically, the China A50 Index is riding an uptrend which is highlighted in the green channel (chart below). An immediate resistance can be found at 14,200 – the 100% Fibonacci extension. Breaking out above 14,200 will likely open room for more upside towards 14,600 and then 14,950.

FTSE China A50 Index – Daily Chart

S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

Gold Price Outlook:

Gold price was recently underpinned by rising virus uncertainty and the low-yield environment amid dovish central banks, sending itto a 7-year high of US$ 1,789 yesterday before a pullback to US$ 1,769. A look back into 2013 reveals a strong resistance at US$ 1,788, where a ‘Triple Top’ was formed.

Technically, it has broken above an ‘Ascending Triangle’, which is a bullish signal. This has potentially opened room for more upside towards US$ 1,800. The roadmap to the current all-time high - set in 2011 – could be bumpy however as several key resistances lie ahead.

Gold PriceDaily Chart

S&P 500 Climbs on Strong ISM PMI, China A50 Soars after PBoC Rate Cuts

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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