Summary:

• Stocks have extended the recovery which began yesterday afternoon
• Sizable gains seen in Europe and US ahead of NA session
• US trade balance falls; Initial jobless rises to highest in almost 3 months

Stock indices are enjoying a fairly widespread day of gains thus far with the recovery which began yesterday afternoon for many seemingly gaining traction. There’s a sea of green amongst European bourses with the RUS50 the only exception in not joining in the move higher. All the gainers on the continent are higher by more than 1% on the day with the SPA35 and ITA40 leading the way. 

As attention turns to the US session, stock futures across the Atlantic are also higher with the US100 the best performer of the 3 major benchmarks. The US500 currently trades 100 points off the lows seen Wednesday morning with the bulk of the gains coming during yesterday’s US session. The market cleared the 2652 level overnight and this is now a potential area to look for support. The highs from the end of last month around 2678 are the next hurdle that longs will want to clear and if they can push up above there then a larger recovery could lie ahead. 

 

 The US500 is higher again today so far with 2652 and 2678 possible levels to keep an eye on. Source: xStation

 The relief rally seen in the equity markets has come after another escalation in US and Chinese trade tensions yesterday despite no real positive developments. It could be due in part to the fact that the sanctions from Beijing weren’t actually as stringent as they could have been or perhaps that sentiment had gotten a little too extreme in the negative and therefore the markets were primed for a bounce. With trade such a keen topic for traders at the minute the latest trade balance figures from the US that have just been released may take on a greater importance. 

 The US trade balance as a % of Nominal GDP has fallen back down near its lowest level in several decades of late. Source: xStation

Looking at the trade balance, which is the difference between exports and imports with a negative reading indicating a greater level of imports than exports. With petroleum products excluded to ignore the trade flows of oil it is apparent that as a percentage of nominal GDP the US level of imports relative to exports are near their highest since the early 1990s. What this means is currently the US on an adjusted for GDP basis is importing more than its exporting by close to its highest rate in 30 years. In other words, the US aren’t in a good starting position to embark upon a trade war as they rely more on imports than exports.  

At the same time as the trade figures there was also the most recent initial jobless claims, with this unemployment indicator hitting its highest level in almost 3 months. The weekly figure came in at 242k, marking a 24k increase. Whilst this data rarely has a tangible impact on the market it could well be worth keeping in mind ahead of tomorrow’s NFP report (preview here). The weakness can be attributed in part to the timing of the Easter holiday and spring breaks with seasonal adjustments tending to be more difficult around holiday and it is important to remember that they remain not far from 45-year lows.