Summary:
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US indices trading higher ahead of the cash open
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Trade tensions lower the bar for Fed to cut?
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Morgan Stanley upgrades Coca-Cola to overweight
As attention turns to the North American session the stage is set for US stock markets to open higher - quite a rare event in recent sessions with even the days where the S&P500 managed to eke out a gain beginning with lower opens. The Nasdaq 100 is the best performing major index ahead of the opening bell, trading up by around 0.8% with the S&P500 and Dow Jones higher by 0.6% and 0.5% respectively.
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The S&P500 got off to a poor start to the week in falling back to the 23.6% fib of the advance from the December low but is looking to recover today. Recent lows of 2802 could be a key level to watch for the upcoming session. Source: xStation
One theme other than the US-China trade tensions that has been widely attributed to the rally seen throughout 2019 is the change in Fed policy as they paused their hiking cycle and the market even began to price in rate cuts as more likely than hikes. The recent escalation on the US-China trade front has only served to raise expectations for a cut in the Fed Funds Rate and the latest BoFA Merrill Lynch Global Fund Manager Survey has revealed some interesting views on this point.
More than 20% of fund managers questioned believe that the Fed would cut if the S&P500 fell below the 2500 mark - that’s only a little over 10% below current levels. Source: BofA Merrill Lynch Global Fund Manager Survey.
In recent minutes US president Trump has taken to social media to further heap pressure on the Fed to cut. Source: Twitter
Coca-Cola is set to begin higher this afternoon with the stock receiving a boost after Morgan Stanley upgraded the firm to overweight and raised the 12-month price target to $55 from $52. “Coke is now our top mega-cap staples pick,” wrote analyst Dara Mohsenian in a note to clients. “We believe KO offers a clearly superior growth outlook vs. CPG (consumer packaged goods) peers, with stronger pricing power, favorable strategy tweaks, solid volume growth, and rebounding emerging market trends, which are not reflected in relative valuation below historical long-term (LT) averages.” Shares in Coca-Cola are called to open higher by around 1%.
Coca-Cola shares are called to open higher after a strong session last time out, thanks to a broker upgrade from Morgan Stanley. Source: xStation
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