Summary:
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US stocks gain on upbeat tariff news
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Soybeans boosted but gains relatively small
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S&P500 remains range-bound back above psychological barrier
After a mixed session to start the new week which saw the major US benchmarks unchanged, there’s been some gains before this afternoon’s cash open with positive dnews on the US-China trade front raising sentiment. Beijing has offered new waivers to purchase up to 3 million tons of Soybeans without any additional tariffs being levied. While this sounds like a promising development it’s not really the impact on the price of soybeans has actually been fairly muted, with the market only higher by roughly 0.3% on the day.
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After the initial spike higher there’s not been any major follow through to the upside in Soybeans after the latest tariff news. This could be seen to suggest that its impact on broader risk sentiment and US indices will be limited at best. Source: xStation
The main economic data from the forthcoming North Amerian session is due to be released at 3PM (BST) with the CB consumer confidence and Richmond manufacturing index both due. These aren’t normally big market movers but there’s a feeling that we could be entering a period of heightened sensitivity to economic releases and Fed speak given that the future path of rates for the US central bank is far from certain at present.
Another development to keep an eye on is the ongoing liquidity squeeze felt in the money markets with concerns increasingly growing. The latest repo operation from the NY Fed was twice oversubscribed with the bank taking $65.8B of securities. The overnight repo was oversubscribed as well with $80.2B tendered vs $75B accepted. For the past week this area of the market has been in focus and it seems to be still under pressure despite the efforts of the NY Fed. For now this is having a fairly small impact on the markets, with some mild USD weakness, a slight drop in 10-year yields and a bit of a dip seen in stocks since the news hit the wires, but this is a story that could be worth watching closely as it could become a bigger market mover into the month (and quarter) end.
How markets trade into their daily close can often reveal and underlying strength or weakness and in the case of the S&P500 there could be a possible warning sign in the price action seen into the closing bell in recent sessions. After gaining strongly in the final hour of the cash session following the Fed-induced drop last Wednesday, the market has sold off into 9PM (BST) in each of the past 3 sessions. Source: xStation
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