Dubai: Better than expected US GDP data may still keep US equities supported at record high as traders brace for the Fed meeting along with tech results.
The dovish Fed is expected to take note of surprisingly strong US GDP data, which came in at 3.2 per cent annualised rate in the first quarter, far exceeding street expectations of 2.5 per cent. The US central bank is expected to keep the rates steady as they meet for the second time this year, and this comes in the background of repeated attempts from the US president Donald Trump to cut interest rates to prop-up growth.
“While positive earning numbers have lent massive support to US equities, it’s hard to ignore the inescapable fact that we are back to the divergent economic narrative where the US economy is on fire while ice water continued to pour over the rest of the globe,” said Stephen Innes, managing partner and head of trading at SPI Asset Management.
The S&P 500 index posted two record close last week, ending Friday’s session 0.47 per cent higher at 2,939.88. The index has gained 17 per cent in the year so far. The Dow Jones Industrial Average closed 0.31 per cent higher at 26,543.33. The Nasdaq Composite closed 0.34 per cent higher at 8,146.40.
“No change in US interest rates are expected but it will be interesting to hear what the Fed’s policymakers have made of first quarter data releases in the US, which have shown a mixed performance and overall haven’t been as bad as some had feared towards the end of last year,” Fawad Razaqzada, a technical analyst at FOREX.com said.
Analysts have a mixed outlook even as crude oil prices fell 3 per cent from their highest level in 2019 after US president asked the Opec to raise production to ease prices.
Brent crude fell $2.2 (Dh8.07) on Friday to end at $72.15 per barrel. West Texas Intermediate crude ended at $63.30 per barrel, or 2.9 per cent.
“The problem for oil bulls is that the market has been overly bid and there were hardly sellers in place. The path of least resistance may be to the downside in the short-term,” Edward Moya, Senior Market Analyst at OANDA said.
However, Ole Hansen, head of commodity strategy at Saxo Bank differed in his view.
“A bullish outcome is by far the most likely outcome. But until fundamentals on the ground begins to support current and potentially even higher prices, the market has also been left exposed to technical setbacks,” Hansen said.