S&P 500 broad market index futures are
rising by 0.13% to 6,002 points. Gains could have been more substantial, but
the Martin Luther King Day holiday has tempered market activity. The benchmark
extended its weekly gains by 1.1% to 3.0% last Friday, buoyed by rumours of
positive discussions between U.S. President-elect Donald Trump and China’s
President Xi Jinping. These talks, described as “good,” have raised hopes of a
shift in the White House's tariffs policy, relieving pressure that has weighed
on markets over the past three months.
While this development is unlikely to lead to
immediate shifts in investment strategies, the S&P 500 could potentially
double its January gains to 4.25%. Investors are preparing for significant
changes in taxes, spending, and trade agreements, which could propel the index
higher. Large investors appear optimistic, as the SPDR S&P 500 ETF Trust
(SPY) reported revised net inflows of $1.51 billion, up from $114 million,
excluding Friday.
Trump’s inauguration is scheduled to begin at
11:30 CET, with the oath of office and inaugural speech expected at noon. The
day’s formalities will extend into the afternoon, setting the stage for
potential market-moving executive orders. Expectations are high, with investors
anticipating more than 100 presidential decrees on Trump’s first day in office.
Coincidentally, the Q4 2024 corporate
reporting season continues to provide positive momentum. Banks have already
contributed to the market rally, and Netflix (NFLX) is expected to add further
impetus. Additionally, the World Economic Forum in Davos could introduce new
catalysts, as Trump is slated to deliver a speech on Thursday, potentially
serving as a sequel to his inauguration announcements.
On the international front, the Bank of Japan
(BoJ) is widely expected to raise interest rates on Friday, with market
probabilities at 80%. A similar move by the BoJ in August caused brief market
panic, resulting in an 8.0% drop in the S&P 500. However, if Trump
maintains a dovish stance on tariffs, markets are likely to remain on an upward
trajectory, targeting the 6,050-6,150 range by week’s end. Future performance
will hinge on whether the index can break through resistance levels.
From a technical perspective, the S&P 500
remains on track towards its primary targets within the 6,050-6,150 range,
though its movements resemble a weathercock spinning in turbulent winds.
In commodities, Brent crude is trading above
$80.00 per barrel, supported by U.S. sanctions on Russia’s oil sector. Although
significant price increases may be capped, a temporary surge to $88.00-90.00
remains plausible. Prices are stabilising above $80.00, favouring an upward
scenario, with strong support at $69.00-71.00 per barrel. A reversal would
require prices to fall below $78.00 per barrel.
Gold prices have risen to $2,706 per troy
ounce this week, surpassing resistance at $2,670-2,690. A retest of this level
is likely, with further gains projected towards $2,770-2,780 per ounce,
potentially reaching new all-time highs.
In the currency market, the U.S. Dollar has
entered a correction phase due to lower inflation and the potential for revised
tariff policies. The EURUSD pair is testing resistance at 1.02800-1.03000. A
breakout above this range could lead to gains targeting 1.04700-1.05700, with a
possible extension towards 1.09500-1.10500.