During yesterday's session, we witnessed the next record levels set by US stock indices. Despite many doubts, emerging pessimism, media announcements of a crash or crisis, American stock indices have reached levels that have never been observed before.
Both the S&P 500 and Nasdaq 100 index set new historical highs. The rise in share prices was due to several factors that seemed to be acting in one direction. In the US there is an earnings season with positively surprising results and waiting for the Fed's decision on interest rates, where a potential cut in the federal funds rate is expected. What's more, there was another optimistic information about a trade war because US trade representative Robert Lighthizer and treasury secretary Steven Mnuchin talked with Chinese deputy prime minister Liu He on Friday and made progress in implementing the trade agreement.
US President Donald Trump said he hoped to sign the first phase of the trade agreement with China when Bloomberg announced at the weekend that Beijing would agree to buy US agricultural products if the US would cancel tariffs on Chinese goods. The reaction of the markets, i.e. the increase in demand for risky assets and the abandonment of e.g. bonds as safe assets, clearly indicates that investors basically seem to discount the fact that we are at a turning point when it comes to US-China relations, and thus may a wave of pessimism about the global economic slowdown will be stopped.
However, optimism among investors did not appear only in the US. We also saw increases in Europe. The DAX index (DE30 on the Conotoxia trading platform) rose to the highest level since mid-June 2018. In turn, Euro Stoxx 50 (EU50) increased to levels not seen since the end of January 2018. The risk of Brexit without an agreement has decreased because the European Union has accepted UK requests for a third Brexit delay. President of the European Council Donald Tusk said that the EU would accept the extension of the Brexit deadline to January 31, 2020. This means that Great Britain will be able to leave the EU at any time before January 31.
The lack of significant impact of the ongoing trade war on US companies' profits along with a possible breakthrough in US-China relations and chances for the third cut in Fed interest rates this year seemed to significantly improve market sentiment, which is also reflected in the weakening of the Japanese yen or franc Swiss.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
