US, China show how its done

• Risk appetite reliant on sustained global economic reopening.

• US stock indexes still poised for more gains over coming days.

• $1800 gold could re-energise bullion bulls.

• Brent needs robust demand recovery to retake $70 handle.

US benchmark stock indices posted new record highs on Thursday as markets cheered signs that the US economy is well and truly getting back on its feet since the pandemic. Although US equity futures now point to a breather from such newfound heights, more records remain in the offing over the near-term. Similarly, Asian stocks and European equity futures are pushing higher as market stake in more encouraging signs about the global economic recovery.

China posted its highest-ever recorded GDP growth of 18.3% in the first quarter, despite coming in slightly below the expected 18.5%. The broad-based recovery also extended into industrial production which climbed 14.1% year-on-year last month, while March retail sales exceeded market forecasts by expanding 34.2% compared to the same month in 2020. Although the year-on-year comparisons are skewed considering that China was in lockdown this time last year, it still confirms that the world’s second-largest economy is making meaningful strides in the post-pandemic era.

China’s stellar economic prints, coupled with Thursday’s better-than-expected data out of the US, show the global economic recovery is indeed gathering momentum and such prospects appear to justify the bullish prospects for risk assets moving forward.

Investors eye further signs of recovery

Markets will focus on the preliminary University of Michigan consumer sentiment readings for April due later today. Traders expect the survey to be at its highest since February 2020 before the Covid-19 pandemic forced lockdowns Stateside. Hopes of a broad-based recovery have been fueled by yesterday’s economic releases, featuring the lowest weekly jobless claims since March 2020 and the highest monthly gain for industrial production since July.

Still, what’s crucial for investor sentiment is that this economic recovery doesn’t show signs of letting up. The global vaccination drive along with the supportive monetary and fiscal measures in major economies all form key components for the risk-on outlook.

Gold eases as the buckcomes up for air

The dollar index (DXY) is attempting to post its first daily advance for the week, though it is unlikely to prevent two consecutive weekly declines for the first time since February. The greenback’s support has been eroded with 10-year Treasury yields moving below the psychologically important 1.60% mark, which in turn has allowed spot gold to break above its 50-day simple moving average (SMA) for the first time since early February.

This technical event may offer bullion bulls a whiff of optimism that could spur prices higher, taking advantage of the fact that real yields lurched deeper into negative territory yesterday. A decisive breach of its 100-day simple moving average which currently resides around the psychologically important $1800 may just do the trick as a clarion call for gold bulls to rush back in.

Oil benchmarks take heart from economic outlook

Oil prices are set for their biggest weekly advance in six, taking advantage of the moderating dollar seen so far this month. From a technical perspective, the 50-day moving average for the active Brent futures contract has proven itself as a reliable support level in recent weeks, guiding the global benchmark higher.

While the solid data out of the US and China this week should support the case for further gains in oil prices, global demand must show itself robust enough to absorb the incoming OPEC+ supplies starting next month in order for Brent to reclaim the $70 handle. Otherwise, any setbacks in stopping the spread of Covid-19could undermine oil’s recent gains.