Trump’s Response On China Was Not As Harsh As Feared
S&P 500 futures lack direction in premarket trading as positive news from China are offset by protests in the U.S.
On Friday, the U.S. President Donald Trump stated that we would begin the process of ending special treatment of Hong Kong but did not impose new tariffs on China.
This was a major relief for the world markets which feared that a new round of trade war will begin between the two biggest economies of the world.
In addition, China’s Manufacturing PMI went back above 50 points in May, signaling expansion of the economy and providing support for the global markets.
Protests In The U.S. Add Another Layer Of Uncertainty
Protests against heavy-handed policing were seen in many U.S. cities over the weekend. In some cases, the protests were followed by unrest, which led to the deployment of the National Guard troops and the declaration of curfews.
At this point, the U.S. stock market has mostly ignored the protests despite the direct damage they can deal to retail and services businesses as well as their potential to serve as a trigger for a second coronavirus wave.
It remains to be seen whether the market will stay calm in case protests continue. Prolonged protests have the potential to serve as an obstacle on the market’s way up as they come at an unfortunate time when the hardest-hit sectors of the economy are trying to recover from lockdowns.
OPEC+ Meeting May Take Place On June 4
The oil rally, which has provided material support to S&P 500 in recent weeks, can continue if OPEC+ unveils additional measures to support the market.
There was a lot of speculation regarding such additional measures in recent weeks, and OPEC+ is rumored to be ready to meet this week in order to reach a consensus on keeping existing production cuts after June.
While the recent oil rally was spectacular, oil prices stay at low levels and oil-related equities will likely need additional oil price upside to get to higher levels. In this light, the OPEC+ meeting is important not only for the oil market but for the whole stock market as it will impact the trading of many oil-related equities.