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14.08.2023 02:08 PM
US premarket on August 14: US shareholders may get rid of their assets

Futures for US stock indices kicked off the trading session with gains. S&P 500 futures rose by 0.2%, while the tech-heavy NASDAQ gained 0.3%. The possibility of political actions from Chinese regulators to address growing financial and real estate risks injected some confidence among traders. However, it has not fundamentally shifted the market's dynamics. Stoxx 600 also increased due to news from China alleviating concerns about real estate-related issues spreading to other markets. Treasury bond yields stabilized at their highest level since November.

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At present, Country Garden Holdings Co. is attempting to extend the maturity date of bonds that are on the brink of default. The Chinese developer risks joining the ranks of defaulters if it fails to make payments on its two-dollar bonds within a 30-day grace period. Amid these events, China's banking regulator recently announced the formation of a working group to study risks in Zhongzhi Enterprise Group Co., which missed payments on investment products sold to affluent clients and corporations.

However, the risk of contagion beyond China is relatively low. However, is this yet another reason to act with extreme caution? The CSI 300 index, a benchmark for Chinese stocks, is now poised to erase all gains made after the Politburo meeting last month, which unveiled additional economic stimulus measures.

This week, special attention will be given to the minutes of the US Federal Reserve meeting regarding policy matters. Traders still hope to glean hints about the central bank's next move. Investors who bet on policy easing this year are forced to adjust their expectations as official statements indicate a longer period of elevated interest rates than anticipated. This maintains pressure on stock indices and strengthens demand for the US dollar.

Investors who reaped record profits in the first half of the year should now actively contemplate how central banks will navigate conflicting signals from inflation and the economy. This only fuels the confidence that there is no rush to cut interest rates.

Barclays Plc recently stated that many investors hold sizable long positions in stocks, while the closing of short positions has run its course. This means holders could become sellers at any moment if volatility sharply spikes, providing a significant trigger.

Regarding the S&P 500, demand for the index has not returned, and trading remains within a sideways range. Bulls have a chance to continue the uptrend, but they need to settle above $4,488 and $4,515. From this level, the trading instrument may soar to $4,539. Bulls also should control $4,557, solidifying the bullish market. If the index declines due to reduced risk appetite, bulls should protect $4,469. A breakthrough would swiftly push the trading instrument back to $4,447 and $4,427.

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