The S&P 500 is approaching historical highs again. Will the current rise continue in the short term?

The S&P 500 continued to gain ground yesterday, September 12, 2020, after closing last week with one of the best weekly performances since July, posting a gain of nearly 4%.

The main driver of the rise in the last week was hope for a fiscal stimulus plan, after an initial hesitation that led to a series of sell-offs on major US markets.

From the point of view of economic data, those released this week show a not fully clear picture and the uncertainty continues to persist just a few weeks before the U.S. elections.

As for the fiscal stimulus, it may not be approved easily, as reported by the Financial Times, the new package does not seem to have a completely clear strategic framework for dealing with the current emergency and there are wide political differences to bridge between the parties in the U.S. House and Senate.

Assuming a scenario in which the new plan is not approved, I still expect a rise in the S&P 500 index on the weakness of the dollar.

DAX 30 returned above 13,000 points. What are expectations for the next sessions?

DAX 30 also rose again yesterday after closing the last week with a positive performance of 2.85%.

The German index, like most European stock indices, rose driven by hopes of approval of the U.S. stimulus package.

From an economic point of view, although the locomotive of Europe continues to show some strength, the German recovery is starting to show signs of trouble.

The leading sector continues to be manufacturing, while the services sector lost 2 points from the previous survey, however for the month of September it beat expectations compared to the estimates of analysts who saw it at 49.1 points.

August was a tough month for German industry, as shown by the data on industrial production which contracted by 0.2%, and the commercial balance which was down compared to the previous month.
On the other hand, the data on orders for German factories was good, growing by 4.5% in August.

There are three main drivers to monitor for the DAX 30 index at the moment: Covid-19 cases rising with consequent danger of new lockdowns, (a factor that could lead to short selling already this week), official approval of the U.S. stimulus plan and UK-EU Brexit negotiations.

The Euro-Dollar has returned close to 1.18: will it still rise from this level?

The euro-dollar closed last week with a rise of 0.99%, favoured by a strong weakening of the U.S. dollar on the possibility of new expansionary measures.

As explained in the analysis on the S&P500 index, weakness of the dollar is still necessary for a long time to favour the recovery of the American economy.

However, the Euro is not particularly strong, and this could lead to short positions on EURUSD in the short term, as traders look for safer assets, especially after the increase in infections in France, Spain, the United Kingdom and Italy.

Gold travels beyond the $ 1,900 mark. Are there the conditions for further gains?

Gold closed last week with a positive performance of 1.51%.

The precious metal benefited from the sharp fall in the U.S. dollar, returning strongly to $ 1,930.

Gold could reverse if there were negative news on the U.S. stimulus package front, otherwise it could easily hit 2,000 again within a few sessions.

Michele Morgante

Account Manager