Equity Markets rallied, with the Nasdaq Composite Index rising to the highest level since July, as the rotation from momentum to value shares that began at the start of the week slowed. Crude oil plunged after President Donald Trump indicated that sanctions on Iran could be eased. The NASDAQ rose for the first time in four days as Apple’s cheaper priced iPhone gave analysts reason to cheer, while the Dow Jones Industrial Average gained for a sixth day and the S&P 500 closed above 3,000 for the first time in six weeks. Trump earlier urged the Federal Reserve to cut interest rates to “zero, or less,” in a tweet, while China moved to lessen the trade war’s repercussions by announcing a range of U.S. goods to be exempted from 25% extra tariffs put in place last year. Overnight, President Donald Trump said he was postponing the imposition of 5% extra tariffs on Chinese goods by two weeks, a move that delays the next escalation of the trade war and brightens the backdrop for upcoming negotiations.
“At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th,” Trump wrote Wednesday on Twitter.
S&P 500 futures climbed 0.5% and the offshore Yuan strengthened 0.3% against the US Dollar. The Japanese Yen fell.
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Equities are rebounding in September on hopes for fresh monetary stimulus from the European Central Bank this afternoon and the Fed next week, while market-supportive measures by China helped lift sentiment. Strong monetary easing is not a given, though, with some investors dialing back their expectations of accommodation and bond traders pulling back from the more bullish sentiment of August.
The S&P 500 Index closed 0.7% higher at 3001. Overnight on the back of Trump’s latest tweet, Futures on the S&P 500 Index expiring in December gained 0.4%.
The Dow Jones Industrial Average gained 0.5% to close at 27,137, reaching its highest level in almost six weeks, on its sixth consecutive advance.
Euro Stoxx 50 Futures advanced 0.7%.
Here is a summary of the main changes in F.X Markets:
The Japanese Yen fell 0.2% to 108.08 per dollar.
The offshore Yuan rose 0.4% to 7.0802 per dollar.
The Bloomberg Dollar Spot Index was little changed.
The Euro bought $1.1014, little changed.
The yield on 10-year Treasuries added one basis point to 1.75%, reaching its highest level in a month on its sixth straight advance.
Germany’s 10-year yield fell two basis points to close at -0.575.
Crude oil futures fell as much as 2.8% in London. Trump is preparing to meet with Iranian President Hassan Rouhani later this month, according to people familiar with the matter. Such talks would be unprecedented for an administration that made isolating the Islamic Republic a cornerstone policy.
West Texas Intermediate crude declined 2.4% to close at $56.03 a barrel which is the largest drop in more than a week.
Gold strengthened 0.8% to $1,495.67 an ounce, the first advance in a week.
This morning on the Economic Front we already had the release of German Final CPI which came in as expected with a fall of 0.2%. At 10.00 am we have Euro-Zone Industrial Production. This is followed at 12.45 pm by the ECB Rate Decision. The ECB policy meeting is widely expected to see a cut to Interest Rates and a review of all options, including QE. Policy makers will also publish new forecasts for growth and inflation. ECB President Mario Draghi will hold a press conference at 1.30 pm. At the same time we will have U.S. Weekly Jobless Claims and CPI. There is no further data this afternoon.
September S&P 500
Frustratingly the S&P just missed my 2872 buy level with a 2873.75 low print before having a huge rally which saw the market trade as high as 3020 overnight. This latest move higher sees the S&P very close to making a new all-time high as has been my prediction for the last two weeks. The ECB Meeting this afternoon and the FOMC Meeting next week will determine the next big move for the markets. If the ECB do not cut Rates today we will see a spike lower before traders turn their attention to the Fed next Wednesday. Today I will move my buy level higher to 2982/2992 with a 2973 stop which is just below yesterday afternoon’s low print. I will also be a small seller on any further rally to 3030/3040 with a 3048 tight stop.
The low of the Euro yesterday was 1.0984, just above my 1.0980 before the market turned higher to trade at 1.1015 this morning. Ahead of Dragi and the ECB Meeting I will now lower my buy level to 1.0900/1.0940 with a 1.0855 stop. I still do not want to be short the Euro at this time.
December Dollar Index
I am still flat the Dollar and today I will now raise my sell level to 98.70/99.10 with a higher 99.45 stop.
I have had the correct view in the DAX for the last few weeks but unfortunately the market has never given me a chance to get long. Thankfully we have had no sell levels in this market with the DAX now trading 1100 points higher in that time. The DAX is overbought and due a correction. Today I will be a small seller from 12490/12550 with a 12610 stop.
I am still flat the FTSE as the market also missed my buy level. The FTSE has strong resistance from 7420/7470 and I will be a seller in this area with a 7510 stop. My only interest in buying the market is still on a dip lower to 7210/7250 with a 7165 stop.
Dow Rolling Contract
Overnight the Dow traded to a high of 27320, which is only 78 points below its all-time high from mid-July. I had no luck with my calls yesterday as the Dow again just missed my 26850 buy level with an afternoon low of 26885 before rallying. The Dow was led higher by Boeing (3.6%), Apple (3.1%) and Caterpillar which closed 2.1% higher as these stocks followed on from the rally in the Banking Sector earlier in the week. This move higher helped the VIX to fall another 4%, closing at 14.61, while the McClellan Oscillator closed with a +175 reading. Today I will be a small seller on any further rally to 27395/27515 with a 27605 stop. I will also raise my buy level to 26880/27030 with a 26795 stop.
The NASDAQ also missed my buy level before rallying strongly into the close and I am still flat. I will now raise my buy level to 7800/7850 with a 7765 tight stop.
I am still flat the Bund as we wait for the ECB at 12.45 pm and the Dragi all-important press conference 45 minutes later. Even though the Bund is trading higher this morning at 174.45 I am reluctant to chase the market higher and I will only raise my buy level slightly to 173.10/173.50 with a 172.70 stop. The Bund has strong resistance from 175.20/175.70 and I will be a seller in this area with a 176.15 stop.
Gold Rolling Contract
I am still flat Gold and today I will raise my buy level to 1475/1485 with a 1467 stop.
Silver Rolling Contract
My Silver plan worked well with the market trading lower to my 18.02 buy level with a 17.97 low print before turning around to trade at 18.25 as I go to press. As I wanted to bank some points for yesterday’s session I covered this position at 18.17. Today I will again look to buy Silver on any dip lower to 17.70/18.10 with the same 17.35 stop. Silver has strong resistance from 18.70/19.10 and I will be a small seller in this area with a 19.45 stop.