Stocks recoup recent losses; ZAR plunges

Summary:

• US indices rally; S&P500 50 points off recent lows 

• Stocks react positively to Powell

• DE30: VW shares gain after report

• Rand craters on dismal GDP report

A topsy turvy session for US stock markets to start the week saw the S&P500 briefly dip to its lowest level in almost 3 months before recovering into the cash close. There’s been a more constructive tone to the latest talk on trade from China, with the commerce ministry stating that the dispute with the US should be solved through dialogue. There remains much to be done and a lot of bridges to be built before a serious de-escalation of the tensions between the world’s two largest economies can occur, but given the near constant negative rhetoric of late, it appears to not take too much to alleviate some of the doom and gloom and improve sentiment.

The 3 large-cap US indices (S&P500, DJIA and NASDAQ) are all higher by around 1% at the time of writing and while they were solidly higher on the opening bell they have reacted positively to a speech from Jerome Powell. While the Fed chair stopped short of going as far to the dovish side as Bullard yesterday, his speech in Chicago was broadly supportive and further confirms the softer stance from the central bank.

Looking into the DE30 one may notice that VW shares are among the top performers in early trading. This could be tied to a report released by the company yesterday evening. The firm confirmed that it would still plan to list its heavy-truck division Tration in Frankfurt and Stockholm later this year despite the latest jitters seen in the markets. It is to be one of the largest IPOs in Europe this year and is expected to be completed before the summer break in August, VW truck chief Andreas Renschler said. The VW’s plan could be a bit surprising to some market observers taking into account the latest downturn in the automobile industry in the western Europe related in part to more restrictive carbon emission regulations.

USDZAR soars by as much as 1.6% on Tuesday despite good moods on emerging markets as the GDP report for South Africa disappointed markets. The first quarter report showed a 3.2% contraction and weakness was present across all major sectors of the economy. This is the third contraction in the past 5 quarters. Traders should pay attention to 14.80 zone that acts as a resistance.