US equities slumped yesterday after the IMF lowered its global growth forecasts and despite the ongoing optimism that a trade deal can be struck with China, gains continue to look limited in scale. News that the replacement to NAFTA is struggling to make its way through Congress plus the prospect of a trade spat between the EU and US is underlining the struggle that global commerce will continue to face in the months ahead so this combined with slower domestic growth has the potential to keep a lid on the upside.
Delta Airlines kicks off Q1 earnings season later today, with factors such as the Federal government shut down having the potential to add an element of disappointment to the numbers. The FOMC meeting minutes later in the session will also be closely followed as any hints of stimulus could buoy sentiment for equities, although with US inflation forecast to move slightly higher, the Fed may be reluctant to show too much largesse. Elsewhere, the ECB releases its latest monetary policy verdict and EU leaders will decide whether to extend the Brexit process, but the accompanying risks here are likely to favour flows into safe haven dollar denominated assets if there are any shocks.
Ahead of the open we’re calling the DOW up 34 at 26185 and the S&P up 5 at 2883.
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support