US stocks opened flat as investors await further trade details and have a muted response to China’s first day of the National People’s Congress summit in Beijing. The overall risk appetite with mode was mixed with better than expected PMI data from Europe and China’s lowering of their economic growth target to the weakest level in almost three decades. The focus in the New York session will be on US data. The shutdown delayed December home sales reading is expected to show continued weakness, the final services PMI print is to confirm the recent rebound and monthly budget statement is expected to show a surplus.
The greenback rose for a fifth consecutive day as markets remain convinced the US will outperform the rest of the world. The dollars pared some of its gains Europe delivered a nice surprise of better than expected data. The narrative for Europe however remains weak and expectations are for the ECB later in the week to downgrade their outlook and possible discuss new long-term loans.
Decelerating earnings growth, a dovish Fed, near end to the US-China trade war, and accommodative policy from other major economies have taken US stocks to a critical resistance level. The market may only be satisfied if we see a clear trade deal that starts immediately and does not give to many punitive powers to the US that will see us back to square one once China fails to comply. It was never going to be a perfect deal, but the markets need to be convinced we will not consistently see the US and China returning to the negotiating table.
Crude prices are seeing a bid after China did not disappoint and signaled they will continue to support the economy. The downgrade of their forecast was followed by stimulus announcement that will help the domestic economy. Chinese tax cuts and eventually further monetary policy cuts will keep China attractive and should be supportive for commodity prices.
Too much optimism is killing gold prices. Europe could be stabilizing following better data across the board this morning, China’s policy summit is unveiling fiscal stimulus that should help alleviate growth concerns, and the trade war is approaching a climatic conclusion that have many expecting a deal will be done.
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