More to This Bounce
On the same theme as our note yesterday, we believe the risk reward is skewed for equity markets to trade higher in the short term. There is a great deal of negative sentiment and news built into the market at the moment. If there is any positive news that comes on trade with China, Mexico and Europe, then this will provide some sort of positive momentum in the short term. The market is oversold and it won’t take much.
It seems that many analysts and investors think the Fed possibly cutting rates twice this year is positive, we don’t see it that way.
Trump and China could both use some good news back home.
The possible antitrust probes, mentioned in our note yesterday, are gaining attention: Alphabet was down over 6% https://www.theguardian.com/business/2019/jun/03/us-tech-stocks-alphabet-google-antitrust-investigation
The RBA (Australia Central Bank) delivered an expected rate cut last night. .25% and it appears more cuts to follow, this is not a good sign for growth in the region.
UK Retail sales fell 2.7% YoY, although May 2018 was strong, this is still not an encouraging development.
U.S. May ISM manufacturing index was below expectations yesterday. April construction spending was weaker than expected.
While the S&P illustrated by the CFD chart is also backed off the highs of the move, it has some work to do to test key support.