Records fall on Wall Street, as hopes for trade-war truce grow

Record highs fall, as week ramps-up

The S&P 500 has ascended to fresh record-highs, thanks – ostensibly – to further signs of progress in US and China trade negotiations. The rally comes as US earnings season, arguably, hits its peak in coming days, and with market pricing showing signs of greater optimism regarding the global economy. The bullishness ought to manifest in a jump in the ASX 200 this morning. In continental news, Brexit promises to drag on for at least a little while yet, after the EU voted to ratify the UK’s Brexit extension. And in the day ahead, local news will be highlighted by a speech to be delivered by RBA Governor Philip Lowe.

Trump pumps the stock market… and celebrates

The timing is always uncanny: not long before Wall Street’s opening bell last night, US President Donald Trump proclaimed to the media that the US is “ahead of schedule, probably a lot ahead of schedule” on signing a trade-deal with China. The news built upon several days of positive trade-war news and bullish sentiment, shooting the S&P 500 above its record closing high during last night’s trade. Despite lingering uncertainty regarding the global growth outlook, risk appetite remains elevated in US stock markets. And that’s a cause for celebration, at least for US President Trump: he took to Twitter overnight to congratulate his country for its “big win”.

The S&P500 breaks resistance, eyes run higher

The benchmark S&P500 closed at 3039 last night, off the back of a 0.57% rally. It was a day’s trade with plenty of gusto, too, that speaks of the conviction – misplaced or otherwise – of this rally. Volumes were over 5% above the 30-day average. The tech sector underpinned the charge, with the NASDAQ adding over 1% last night, though that rally must be put into the context of a relatively disappointing set of Q3 results from Alphabet in post-market trade. Overall, the S&P500 clearly eyes trendline resistance at 3060 as the next key level to watch for the index.

Broad-based signals of improving outlook

Though markets have seen a flurry in equity markets on little more than a few happy-headlines about US-China trade-talks in the past week, the signals of greater hope for the US and global economies are broadly spread. Global bond yields are climbing, and are doing little to curb enthusiasm for equities (yet), with US Treasury yields, for one, breaking through their downward trend overnight. Gold prices have pulled back as a consequence of climbing global rates. Broader commodity prices have traded mixed to begin the week, but remain off their lows. The Japanese Yen also sold-off last night, with growth sensitive currencies leading the G10 pack.

ASX200 to pop higher at the open

The market’s general bullishness ought to rub-off on the ASX200 today, with SPI Futures suggesting the benchmark index ought to open around 25 points higher at this morning’s open. The very broad interest will be in whether the ASX can hold onto its gains today, after beginning yesterday’s trading with a similar jump, only to drift lower throughout the day’s session, to close practically flat. Cyclical, growth sectors of the market underpinned that market’s rally during Monday trade, with industrials, energy and material stocks topping the intraday market map. The next line in the sand will be around the 6775 -resistance level – a mark the market sold-off from yesterday.

RBA Lowe’s speech the major local news

Locally, the primary interest will be in a speech to be delivered by RBA Governor Philip Lowe tonight. The topic of his address won’t cut through any big issues, judging by its title: “Some Echoes of Melville”. There’ll no doubt be see some allusion to the RBA’s decision next week, however. The market right now expects less than a 20% chance of a cut next week. If Governor Lowe reaffirms the “I wouldn’t assume it” line delivered in a speech about further rate cuts from the RBA a fortnight ago, these odds could be lowered even further. That’d give the Aussie Dollar another little nudge higher.

Brexit uncertainty to live on

If there was a news story that had a moderating effect on market sentiment last night, it related to Brexit uncertainty once again. The Pound leapt 0.3%higher during European trade, after the EU voted to grant a “flexible” extension of the Brexit deadline to the end of January 2020. A positive development. The problem, however, proved again to be in the UK Parliament. It voted upon whether to hold a General Election in December to break the Brexit deadlock this morning – a vote that was roundly rejected. Brexit chaos lives on for another day, with no clear path forward on the matter, yet, in sight.