The XJO is expected to open practically flat this morning despite continued buying in the U.S overnight. Their futures are flat.
With Trump bending the knee to Xi, it seems money is returning to the U.S. This isn’t too surprising as it would mean the U.S is getting closer to when Biden was president. Tariffs still exist, and the pause is for 90 days, but their market clearly feels Trump, like previous administrations, will always bow down to capital markets eventually.
We have not seen the same gains as the U.S over the past couple of sessions, since their recent break higher. This could be due to capital that fled to our safe havens are now returning to the U.S – coupled with the fact we have outpaced them from our respective lows. Furthermore, the U.S had lower than expected CPI last night, which likely help boost their market.
We are set for a fairly mild day. The past few sessions indicate our market is running out of steam. However, if the U.S continues higher, then we should continue to follow.
US Markets
US shares were mixed overnight with gains in the SP500 and NASDAQ, while the DOW JONES closed lower. US shares were largely buoyed by a April inflation report, which came in slightly lower than expected, and slightly lower than March. It is worth noting that the report doesn’t include most of the effects of the Trump tariffs, so it is uncertain if it will have much affect on the timing of FED rate cuts moving forwards. It was again the tech and growth stocks that fared the best, perhaps due to the lower inflation (and hopes of rate cuts) or perhaps due to their relative insulation from trade wars. Despite the lower inflation, bond yields didn’t really fall, suggesting the bond market doesn’t view rate cuts as increasingly likely due to the inflation report. We will see some retail sales and other data on Thursday night, which could provide further clues as to how the US economy is tracking. For the market though, for now optimism seems to remain on the backdown in the trade war, though given that only tech and growth has really continued higher overnight, it might suggest that the current move is running out of steam.
Six of the eleven sector groups of the SP500 closed higher overnight, with Technology, Communications, and Discretionary against the best performers. Healthcare again fared the worst. Most sectors were fairly flat.
Technically, the SP500 gapped through the potential resistance and previous peak at 5,800. This is a technical bullish signal, with the all-time high around 6,150 now a realistic technical target.
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