Wall Street may have been quick to applaud the breakthrough in terms of the US government shut down on Friday, but index futures were just as swift to find reverse gear and have been posting steady declines through the Asian session. The short-lived cheer appears to be a consequence of an incredibly congested calendar in the week ahead, which will see the latest round of trade talks between the US and China, the FOMC’s latest call on monetary policy and a slew of high profile earnings releases. Any of these items in isolation has the potential to drive short term sentiment for equities but combined the outcome could be even more pronounced.
Critically, the US government reopening is only a temporary measure. The timing may help with progressing the trade talks, whilst the resumption of some data points such as the aggregate CFTC positions will also be keenly awaited by the market as it looks to play catch up, but the risk remains that government may once again grind to a halt by mid-February anyway. Today’s earnings highlight is arguably the industrial giant Caterpillar which will be reporting before the opening bell and again could provide some wider indications as to the outlook for the economy as a whole.
Ahead of the open we’re calling the DOW down 122 at 24615 and the S&P down 14 at 2651.
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies