S&P
500 broad market index futures are rising by 1.5% to 5,436 points this week
amid ongoing market volatility. However, this upward move is happening at a
crucial juncture, as the benchmark has broken above the key support level at
5,410 points. If it manages to hold above this threshold, an accelerated rally
towards the 5,750–5,850 point range could unfold rapidly.
Several
factors are fuelling this optimism. Most notably, U.S. President Donald Trump
has unexpectedly reduced tariffs on Chinese electronics to 20.0%. While he
insists this move is temporary, it marks a significant shift in
tone—effectively a symbolic retreat. The so-called tariff blitzkrieg against
China appears to have failed, and the U.S. administration is beginning to
accept China’s resilience. With this easing of tensions, markets are hopeful
that trade talks may resume, offering a fresh boost to investor sentiment.
Meanwhile,
attention is turning to the Federal Reserve, which is now expected to support
the markets through monetary policy. Investors are increasingly confident that
a 25 basis point interest rate cut will be delivered in June, with the total
number of cuts projected to reach at least three by the end of the
year—bringing the benchmark rate down to 3.75% from the current 4.50%. This
sharply contrasts with the hawkish expectations that dominated before the
recent stock market turmoil. Fed Chair Jerome Powell is set to speak on
Wednesday at the Economic Club of Chicago, and his remarks will be scrutinised
closely. With inflation easing, markets anticipate a dovish tone. Should Powell
maintain a hawkish stance, President Trump - already bruised by the collapse of
his tariff campaign - may respond harshly.
Also on
Wednesday, the U.S. will publish retail sales data for March. A strong acceleration
from 0.2% to 1.4% MoM is expected, partly fuelled by the temporary
tariff-driven economic activity before April 2, dubbed “Liberation Day.” A
positive surprise here could further enhance macroeconomic sentiment, lending
additional support to equities.
Across
the Atlantic, the European Central Bank is anticipated to lower interest rates
by another quarter point on Thursday. This move is already largely priced in by
markets, but ECB President Christine Lagarde’s commentary may attract attention,
especially in the context of global trade tensions. However, given her
diplomatic track record, any remarks are likely to be cautious and measured.
The
corporate Q1 2025 earnings season is gaining momentum, with encouraging signs
from the U.S. banking sector setting a positive tone. Netflix (NFLX) is among
the next key reports and is expected to offer insights into the health of the
tech sector. Investor positioning suggests a strong belief in a bullish
outcome: the SPDR S&P 500 ETF Trust (SPY) recorded $23.2 billion in net
inflows last week (excluding Friday), a bold bet that could drive the index
towards extreme highs near 5,780 points.
Overall,
the S&P 500 remains in a firm upward formation, with near-term targets at
5,750–5,850 points.
In the
commodities market, Brent crude slipped below the critical $68–70 per barrel
support, touching as low as $60 before rebounding to $65.40. Recession fears
continue to weigh on prices, but renewed trade negotiations could trigger a
recovery back toward the $68–70 range. Nevertheless, increasing output from
OPEC+ may limit any substantial upside.
Gold
surged to a fresh record of $3,245 per troy ounce on safe-haven demand.
However, with prices at elevated levels, profit-taking is increasingly likely.
Support lies between $3,150 and $3,180, with resistance at $3,250–3,380. If
upward momentum fades, a technical pullback to $3,000 is not out of the
question.
In
currency markets, the U.S. Dollar remains under pressure. The sell-off in U.S.
Treasuries continues to undermine the Greenback, pushing EURUSD higher.
However, if China halts its selling of U.S. debt at least for a week the EURUSD
could face a sharp correction, with downside targets at 1.06000–1.07000.