Market Direction Week of April 9, 2018©

Market Direction:BULLISH alert issued 2/15/2018

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Last Week Review: Stock markets churned in a choppy week of trading as the U.S. and China exchanged tit-for-tat tariff announcements that ultimately led the market lower. Beginning on Monday, China announced that it would impose tariffs on U.S. goods worth about $3 billion. This was China's response to the steel and aluminum tariffs President Trump announced in March. The White House answered with proposed tariffs on 1,300 Chinese products worth about $50 billion, but the Chinese government nearly matched it with its own set of proposed tariffs on $50 billion on U.S. exports in the auto, aerospace and agriculture industries. It is important to note that neither country has officially imposed these tariffs yet. The message from Chinese officials invite the U.S. to negotiate a trade deal, indicating that the final deal may not include tariffs at all. Trade and policy uncertainties are a headline risk, but the fundamental foundation of economic expansion and rising corporate profits is still very much intact. 

On Friday (4/6) we learned from Facebook that the data of 2.7 million EU citizens were among those improperly used by political consultancy Cambridge Analytica. On a related note, Facebook CEO Mark Zuckerberg is scheduled to appear next week before the U.S. Congress regarding the data of 87 million of its users that may have been improperly shared. Some are speculating that the U.S. could adopt an internet privacy policy that is similar to the much more strict policies followed in Europe.

The big news out of Asia this week was that early Wednesday morning (4/4) China retaliated against the $50B in US tariffs proposed by President Trump, by slapping duties on soybeans, aircraft, automobiles, beef, fruit, wine, electronics, and chemicals. Then on Friday (4/6), China announced another $100B in tariffs and a commitment to match all further announcements by President Trump, like-for-like.

How the market finished last week, the S&P 500 down 1.4%, the Nasdaq down 2.1%, and the Dow down 0.7%.

This Week: After falling into a second correction based on a technical market indicator on Monday 4/2 (-10.1% from the 1/26 peak) following a retaliatory tariff announcement from China, it appeared mid-week that volatility might begin to settle down. But it was not to be, as an escalation of the trade spat with China on Friday (4/6), resulted in yet another tariff tantrum.

There are very few changes in the short-term, thus the outlook for next week continues to be equities are likely to continue to be driven by activities and news out of Washington D.C. the secondary outlook is that it will also remain volatile throughout the week.

US earnings season is upon us again, with the blizzard of earnings beginning midweek. But, as ever, it is the banks on Friday that will really signal the start of things.

We also have full-year numbers from Tesco, providing insight into the UK grocery sector.

Meanwhile, the economic calendar is dominated by consumer price index (CPI) reports from the US and China, and by the latest set of Federal Reserve (Fed) minutes.

Economic Calendar: PPI-FD (4/10), Consumer Price Index (4/11), FOMC Minutes (4/11), JOLTS (4/13), Consumer Sentiment (4/13) 

Some of the major earnings announcements on deck: FAST, DAL, BLK, C, JPM, WFC.

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