U.S. markets updated their historic highs on Thursday afternoon, and the European was near the highest since 2015 after reports of U.S. and China’s willingness to lift tariffs in phases as the trade pact was signed.
These comments returned purchases to stock markets, as well as the sale of bonds and gold – traditional quiet havens for investors. at one point lost about 2% in the day, falling to 1461 and bringing the loss from the beginning of the week to $53.
However, on Friday morning Asian indices are recoiling from their local highs, as well as futures for European and American futures for indices.
Progress in trade negotiations has been recouped by the markets for quite some time, so they need a higher “dose” of good news to continue the rally.
This means that despite the update of highs the day before, the indices are still clearly towed, which makes the rally unsustainable. The current situation is rather called the final stage of the rally, which is too late to join new players.
The foreign exchange market remains in strong demand, which has risen to near 3-month highs against the dollar, despite the latter strengthening. The U.S. currency adds to and, as speculators rush to bet on the improvement of macroeconomic indicators of the U.S. and China after the signing of the agreement.
But again, it is necessary to keep a more cautious position. Debt markets have already laid in quotes that in December there will be no rate cut, so this driver of the dollar growth has already exhausted itself. In addition, it is worth paying attention to the sharp slowdown of lending in September. Despite the rate cut, U.S. household loans rose 9.5 billion from 17.8 a month earlier.
In addition, at the end of September there was a trend to increase the number of repeated applications for unemployment benefits in the United States.
Data from China also show the negative effects of trade disputes. and continues to fall, according to the data published this morning. And the banking sector notes a further deterioration in credit conditions, requiring the government to take new stimulus measures.
At this stage, the global market cannot grow “on its own” based on economic data. The only resource of growth remained only political promises and easing of monetary conditions. This is a very dangerous situation. Very soon, in a few months or quarters, this resource will exhaust itself, and then little will stop the markets from failure.
FxPro Analyst Team