US stocks cap off big week with fresh record highs

Records fall again on Wall Street

The US stock market hit fresh record highs on Friday. The latest rally was catalysed by, on balance, some better than expected US economic data, as well some relatively positive trade-war headlines. The ASX 200 is expected to open higher this morning, off the back of a week that could be said to be lukewarm for Australian stocks. The interest today will turn to local retail sales data today, as traders prepare for tomorrow’s RBA meeting. And on a global front, though it’s unlikely to be anywhere near as significant as last week, traders will be positioning for another busy week in the week ahead.

Bullishness reigns in US stock market

Having swung-about amidst a very data-dense week last week, the US stock market ended with a bang on Friday night. The benchmark S&P 500 closed just below 1% higher, in what was a high activity day on Wall Street. Strong US jobs data, and a sprinkling of trade-war optimism can be thanked for the move, which, from a technical perspective, sent the S&P500 above a multi-year trendline resistance level around 3060. It adds to what’s been a better-than-expected reporting season for US stocks, with the forecast contraction in earnings growth narrowing to -1.1% for Q3, and 76% of companies beating estimates.

Swinging trade-war sentiment turns positive

Now of course, any move that’s trade-war related may well prove fleeting. One need only to look at last week how speculation about US-China trade-talks can move markets. Nevertheless, on the surface, hope has bloomed anew amongst traders, after China stated its achieved “consensus in principle” with the US on the “phase-1” trade deal between the countries. That message came following a phone call held between US and Chinese negotiators, aimed at securing a new date to sign a trade agreement. No such data has been announced, so market participants will likely remain sensitive to trade-headlines until this confirmation occurs.

US jobs data eases fears of US economic slowdown

There was also a keen focus on fundamentals on Friday. A batch of high impact US economic data was released, with US Non-Farm Payrolls and US ISM Manufacturing PMI data the chief concerns. The latter disappointed, missing expectations, though printing more strongly than last month. But the real focus was on the US jobs numbers, and it surprised to the upside. 128,000 jobs were added to the US economy in September, clearly above the 90,000 estimated leading into the release. Indeed, the rate of jobs growth in the US is slowing down. However, it’s not so severe yet to incite fears of a looming US recession.

Strong US lead to see ASX open high today

The notion that deteriorating US business conditions isn’t weighing too heavily on its labour market, and that the all-important US consumer remains in a solid-enough space, was what really underpinned Friday’s record-breaking rally. And that’s setting up the ASX200 for a strong start to this morning’s trade, with SPI Futures suggesting that the benchmark index ought to open 25 points higher. Investors will be hoping this jump out of the gates will herald a more bullish week’s trade for the local stock market. The ASX200 appeared to consolidate last week, judging by its price action, shedding 1%, even in light of the grind higher in global stock indices.

US Retail Sales data prefaces tomorrow’s RBA meeting

Attention turns today to the release of Australian Retail Sales data, as traders look to get a final gauge on domestic economic health before tomorrow’s RBA Meeting. Retail activity is expected to have expanded 0.4% last month, with the data being analysed through the lens of whether the numerous stimulus measures thrown at households by policymakers in 2019 is beginning to show-up in consumer behaviour. Whatever the result, today’s data won’t shift the dial for the market’s views on tomorrow’s RBA meeting. Traders are ascribing a less than 5% chance that the RBA will cut rates this month.

A few things to watch in the week ahead

Last week will be tough to match in terms of high-impact, market-moving news. However, a few events do jump out from the economic calendar that are worth noting. Globally, there’ll be a bit of interest in the UK economy, as the countries election campaign kicks-off, and as the Bank of England meet to decide rates. Data-wise, US Non-Manufacturing PMI is released, New Zealand and Canada release their jobs numbers, while the EU updates its economic projections. Locally, it will be mostly about the RBA. But earnings season also rolls on, while a degree of interest will be in the release of the RBA’s quarterly Monetary Policy Statement.