In recent weeks, the market has been tackling the issue of global growth prospects. A drab Eurozone, signs of a pick-up in China and the continued relative outperformance of the US. The focus today is squarely on US growth for Q1. The hype has been built up in recent weeks by a series of positive data surprises (retail sales, trade data) which have boosted expectation. Consensus is looking for another decent quarter at +2.0% annualised (from a downwardly revised +2.2% in Q4 2018). However, the Atlanta Fed’s GDPNow tracker has given a reading of +2.7%, quite a lot more positive and opening the door to a potential surprise in the data. The dollar has been very strong in the run up to this growth number, which begs the question, ow much is baked in? Is a strong number needed to meet fairly heady expectations for the dollar? Major markets are consolidating this morning with little real direction. What is interesting is that there is still a safe haven bias through markets, with the yen and gold performing better whilst bond yields hold their recent declines. The bull run on equities should not necessarily be taken for granted.
Wall Street closed a shade lower with the S&P 500 losing 1 tick at 2926. US futures are similarly cautious in early moves today. Asian markets are cautiously lower with the Nikkei -0.2% on the final day before a 10 day national holiday, whilst Shanghai Composite is -0.3%. In Europe there is a mixed look to the opening moves, with FTSE futures a shade higher +0.1% but DAX futures are lower by -0.1%. In forex, there is little real direction although AUD and NZD are slightly higher. In commodities the near term support for gold continues to build as it tests $1280 again. Oil continues to unwind back after recent gains.
On the economic calendar, a first look at US growth for the first quarter will be of primary focus for traders today. US Q1 Advance GDP is at 1330BST and consensus forecast is +2.0% (+2.2% final Q4 2018). However, with considering the final Atlanta Fed GDPNow had a reading of +2.8% there is a realistic prospect of an upside surprise. The final reading of Michigan Sentiment for April is at 1500BST and is expected to be revised higher to 97.0 (from 96.9 prelim, but down from 98.4 final March).
Chart of the Day – FTSE 100
The big bull run higher has stumbled in recent sessions and now threatens a correction. An uptrend channel in place since December has posted a series of higher lows and higher highs, but with two successive decisive negative candles a near term unwinding move is developing now. Momentum indicators have given a series of near term profit taking signals too. The RSI again peaking over 70 to be followed by a move back below 60 is a near term corrective signal. During the past few months each near term correction has pulled back to 50 on RSI. Coupled with bear crosses on MACD and Stochastics, and this suggests that a retreat is on. The pivot of recent weeks at 7370 is the immediate test, but more likely is a pullback towards the channel support. The four month channel is at 7295 today, but there is a slightly shallower two month channel supportive at 7264 today. This also coincides with the rising 55 day moving average (at 7262 today) which has flank the run higher. The medium term outlook remains strong, but near term corrective signals are certainly growing now. On the hourly chart initial resistance is at 7438/7454. Initial support is at 7385 and 7367.