Originally published by Rivkin Securities
Tuesday saw a rebound in the recently unloved reflation trades as selling pressure subsided and the highest US consumer confidence reading in sixteen years reminded investors it’s not all about politics. For the month of March the US consumer confidence survey rose to 125.6 from 116.1 in February and higher than the forecast 114. The survey of present situation rose to 143.1 from 134.4 as did expectations over the next six months rising to 113.8 from 103.9, also the highest in sixteen years.
Overall the survey supports data over the past twelve months that economic conditions continue to improve and that the US economy remains on a strong footing. Undoubtedly a significant contribution particularly in optimism since then can be attributed to Trump’s proposed policies, however it is not the sole factor.
Prior to Trump’s victory the US economy was already performing well, employment was at levels considered by economists to be “full”, wage pressures were building, inflation was on track to hit the Fed’s 2% goal and the earnings recession was over. It was not only the US but the global economy as well, the Chinese economy had stabilised, Europe was showing initial signs of gaining some momentum, and the UK remained resilient following the Brexit referendum. All in all things were starting to look good from a global perspective.
Investors seemed to focus on this overnight with the US Dollar Index rebounding +0.52% tracking rising U.S. treasury yields with both the two and ten-year gaining +5 and +4.5 basis points respectively. US equity indices rose as both the S&P 500 and Nasdaq 100 gained +0.61% and +0.73% respectively with the best performing sectors energy (+1.31%), basic materials (+1.28%) and financials (+1.21%). Given the weighting of our local market towards basic materials and financials it is likely we will see a similar performance on the local market today.
The rebound in equities occurred broadly across the globe, in Asia the Korean KOSPI rose +0.35%, as did the Nikkei 225 225 up +1.14% and the Hang Seng +0.63%. In Europe the Euro STOXX 600 gained +0.61% along with the FTSE 100 +0.68% and DAX +1.28%.
Locally the S&P/ASX 200 jumped 74.54 points or +1.30% on Friday to close within the key resistance zone between 5,800 and 5,827 shown on the first chart below. This morning with ASX SPI200 futures up +13 points we look set for a break above this region and a decisive close above 5,827 is a bullish sign, opening the possibility for up further upside towards 6,000 in the coming months. The alternate scenario is that a failed break above resistance would signal the likelihood of a pullback to test initial support between 5,681 and 5,675 marked by recent lows.
Data releases:
· Japanese Retail Trade (MoM & YoY Feb) 10:50am AEDT
· Fed’s Evans Speaks On Economy 12:20am AEDT
· US Pending Home Sales (MoM & YoY Feb) 1:30am AEDT
· US Crude Oil Invetories (Mar 24) 1:30am AEDT
· ECB’s Praet Speaks 3:50am AEDT
· Fed’s Williams Speaks 4:00am AEDT
Chart 1 – ASX200 Index
Source: Rivkin, RivkinTrader