European markets are trading higher thanks to the German retail sales data which came well ahead of the consensus forecast of 1.9 percent. Today’s number printed the reading of 3.3 percent, a lot more stronger number versus the previous reading of -3.1%. This shows that German consumers have started to feel more relaxed. This improvement in retail sales data may also have spillover effects in the upcoming week’s economic numbers as well.
U.S. futures are trading higher as traders are positive about the upbeat economic data out of China. It seems like the flow of good news has amplified, this is uplifting the confidence among traders. The Chinese Caixin PMI, a private gauge of manufacturing, came well ahead of the forecast. The survey predicted that the number could be at 48.5, but the actual number came in at 49.9, beating the previous reading of 48.3. The reading of 50 differentiate between expansion and contraction and the 49.9 is still below the expansion line, but investors are pleased to see improvement in this number. A lot of this is due to the ongoing optimism about the trade war negotiations between the U.S. and China. The deal could be around the corner, both parties are in the final steps of finalizing them; in fact, they are exploring the dates for the joint summit. This really shows that some tremendous progress has been made. Finally, the saga of trade war may come to end and hopefully, no one will ever touch it again. The IMF already has wanted that the trade war is going to leave some scars on both countries; however, given that the deal is within sight, I believe that these scars will soon be cured.
Once again, Wall Street is ready to kick to start the new month on the front foot. We have two consecutive months of gain for the S&P500 and year-to-date the index is up 11.08 percent. Similarly, the Dow Jones index has closed in positive territory for the past two months and it has jumped 11.10 percent YTD. The NASDAQ index soared 13.52 percent year-to-date.
Fed chairman, Jerome Powell, maintained his stance in his latest testimony; the Fed is likely to remain patient with respect to their monetary policy. His message was simple and clear: there are too many crosscurrents and conflicting signals, and the Fed needs to asses them carefully. This is because there are external factors such as the slowdown in the global economy. Basically, the overall statement was somewhat dovish. However, traders are still not buying this and this is the reason that we are still seeing some strength in the dollar index. This is also due to the strong U.S. GDP number, it was much stronger than the expectations and this took the market by surprise.
The strength in the U.S. GDP number removed the wind out of the gold rally and the yellow metal could be targeting the psychological support level of $1300. Traders will be observing this level very sensibly and if we close below the 1300 mark this week, it would send a bearish signal. The monthly chart for gold shows that we have two consecutive months of losses and this raises the question if the bull has run out of steam. It appears that the price is really struggling to break the resistance of 1350 and the rally which started back in October 2018 needs some strong catalyst to break the resistance of 1350.