Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York. US equities have hit record highs and analysts say higher levels could be reached soon. Image Credit: Reuters

Dubai: The two big potential risks — the US-China trade war and the Federal Reserve — have been kept in abeyance, fanning risk appetite among traders for now, but second quarter earnings will be key going ahead.

The super-dovish stance from the Federal Reserve, and the truce in the trade war propelled US equities to their record highs and analysts say higher levels could be reached in the near term.

The Dow Jones Industrial Average touched its peak of 27,333.79 on Friday, before closing 0.90 per cent higher at 27,332.03.

The index has gained 17.17 per cent since the start of the year.

The S&P 500 index ended 0.46 per cent higher at 3,013.77, after hitting a peak of 3,013.92.

“Still, with talks ongoing and the Fed soon to be back in easing mode, attention can now shift to earnings season which gets underway next week. It’s expected to be a tough season for companies with a large number have offered negative guidance in the run up to it. An earnings recession looks on the cards, with earnings expected to have declined by a little below 3 per cent in the second quarter, further fuelling the case for rate cuts,” Craig Erlam, Senior Market Analyst, UK and EMEA at OANDA said.

The earnings season is expected to set a weak tone.

Of the 114 companies that have issued earnings guidance for the period, 77 per cent have issued negative forecasts, according to data from FactSet.

Han Tan, market analyst at FXTM said “risk appetite will be hit by a steeper deterioration in the global growth outlook, although such downcast sentiment could be mitigated by the prospects of incoming stimulus from major central banks.”

Gold prices stayed above the keenly watched $1,400 (Dh5,141) an ounce mark.

International gold prices touched a high of $1,413.41 on Friday, after gaining 1 per cent last week.

“The key level below remains $1,380, which it’s seen support around on a couple of occasions recently. A break below here may signal that a sharper correction is on the cards. It may not be straightforward though as we failed to break this earlier this week also, suggesting there is some indecision and possible consolidation on the cards,” Elam said.

Gold prices have gained 10.35 per cent since January 1.