Summary:
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Equities jump on US-China trade hopes
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US Q2 GDP (+2.0%) meets forecasts
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S&P500 eyeing up 2944 resistance once more
Futures are pointing to a strong start when the opening bell rings out in New York this afternoon, with gains in the region of around 1% seen in the major indices. Equities received a boost this morning not long after the European open with reports that the US and China are still in touch on trade and discussions are underway for further talks next month. There’s nothing new or tangible in these remarks, but it is perhaps telling that the market seems to be looking through the negatives and focusing on the positives in recent trade.
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The above graphic neatly summarises the current state of play with tariffs between the US and China. Source: Office of the U.S. Trade Representatives, Bloomberg.
On the data front the main release of the afternoon saw the preliminary US GDP Q/Q for the second quarter come in at 2.0% in annualised terms, meeting consensus forecasts but showing a small 0.1% drop on the prior. The preliminary is the 2nd of 3 readings for this data point and due to be sandwiched between the first and last often causes minimal market reaction. The composition of the growth can provide further insight into the economy with personal consumption of 4.7% comfortably above the 4.3% expected. The the breakdown of investment showed the first contraction in business investment since 2016 (-0.6%), while home investment was revised down to -2.9% from -1.5% initially.
Strong personal consumption was a clear positive in the latest US growth figures, although falling investments is a potential source of concern. Source: XTB Macrobond
Recent price action is a good sign for bulls and with the S&P500 back above the 2900 handle, the market is within striking distance of prior resistance at 2944. Price is back above the 21 EMA on D1 after the recent gains, with the gradient of both the 21 and the 8 now pointing higher. The 8 remains below the 21 but a push and hold above 2944 would likely be accompanied by a bullish cross and could resolve the recent consolidation in a bullish manner. Source: xStation
