S&P500 fades into close, as US President Trump avoids giving guidance on trade-talks

Markets hit half-way point of week in a mixed state

Stocks grinded higher in Europe, but closed flat in North America, as traders continue to await substantial developments in US-China trade-talks. There was some hope that might come from US President Donald Trump’s speech to the Economic Club of New York overnight – but the President left market participants high-and-dry. The ASX 200 is expected to open strongly this morning now, as interest falls to today’s domestic wage growth data. It’ll also a busy day across the Tasman, with the RBNZ expected to cut rates at its meeting this afternoon. That will lead into a big night’s trade tonight, which includes US CPI data, and a testimony from US Fed Chair Jerome Powell.

Optimism in global markets moderates further

The S&P 500 made fresh record highs in Wall Street trade, briefly extending beyond the 3100 level, before closing trade practically flat. It built upon a European session which saw a broad-based rally in European equities. It was another risk-neutral day in financial markets overall. Global bond yields dipped as traders become somewhat less optimistic about progress in trade-talks. The US Dollar climbed, adding to its recent recovery, though the Yen was the big gainer in the currency space, and the Aussie Dollar fell further. Gold recovered a skerrick of its recent falls, while oil and copper prices dropped as excitement about a turnaround for the global economy moderated.

US President Trump takes air out of S&P500

The intraday shift in market momentum was brought, in essence, by a speech delivered by US President Donald Trump at the Economic Club of New York. There was some hope leading into the event, that the US President might provide an update on the state of US-China trade talks. Despite some typically glib commentary – a “significant [trade-deal] could happen soon”, “If we don’t make a trade-deal, we’re going to substantially raise those tariffs” – not much new information came out of Trump’s speech. The S&P500 sold-off subsequent to the speech, unwinding a 0.5% intraday rally, as traders continue to search for evidence of progress in trade-talks.

ASX ought to open higher, after yesterday’s sell-off

The S&P500’s drop was somewhat accelerated too by comments made by Trump advisor Larry Kudlow that any US-China trade deal would have to be “good”. Nevertheless, even in light of Wall Street stock’s fade into the close, the ASX200 is expected to open around 20 points higher today. It comes off the back of what was a weak day for the benchmark index, which once again balked at the market’s key resistance level of 6775. The drop was largely generated by a fall in Westpac shares, as they went ex-dividend. However, a fall in the materials sector and CSL also contributed to the market’s weakness.

Wage growth data highlight’s local calendar

Local trade today will be highlighted by the release of quarterly wage growth data this morning. As is probably too acutely known by many, wage growth has been stubbornly low in Australia. It’s caused headaches for the RBA, which has struggled to stoke the necessary activity in the labour market to drive wages growth – and, therefore, a satisfactory level of inflation in the Australian economy. The RBA has recently expressed its concern about the outlook for wage growth in the economy. A miss in today’s wages data will only add to these concerns, and increase the odds of another rate cut from the RBA in the near future.

RBNZ to top the list of concerns in Asian trade

The RBNZ will meet today, and will likely cut interest rates for the fourth time this year, to a new-record low for the New Zealand economy of 0.75%. As it stands, a cut today from the RBNZ is considered a 76% chance. The move will come as the RBNZ expresses increasing anxiety about the ongoing strength of New Zealand’s economy. Growth is slowing down, and that’s beginning to manifest as an increase in the unemployment rate. The slack building in the economy is also exacerbating what is already below-target inflation – a view compounded by yesterday’s substantial miss in the country’s inflation expectations data.

Thus, begins a data-dense couple of days

Tonight’s North American session will kick-off several days focused on US economic fundamentals. US CPI data is released, and is forecast to show inflation was flat last month at 1.7%. The big interest, however, will be in a testimony scheduled to be delivered from US Federal Reserve Chair Jerome Powell before US Congress. Although the Fed is expected to remain on pause for a little while, the Fed is still forecast to cut once more in 2020. The fundamental concern for the market will be in gauging how amenable the Fed-head is to potentially lowering rates once again in the future.