S&P500
The US market closed the week at a low for the year.The main US indices closed last week with a strong decline. The Dow dropped by 2.8%, the NASDAQ lost 4.2%, and the S&P500 fell by 3.6%.The S&P500 index is trading at 4,132 and is expected to be in the 4,100–4,170 range.The fall in the US market last week was driven by several factors. Unexpectedly, US GDP showed a fall of 1.4% in Q1. At the same time, the situation with falling GDP is exacerbated by a rise in inflation to +8% per annum. This is a real signal of the possibility of stagflation, the biggest possible problem for a developed economy. This is because high inflation requires a tight monetary policy from the central bank and hence the central bank has no instruments to support economic growth.The Fed will meet on May 4. The rate is forecast to rise by 0.5%. The announcement of a monetary supply reduction at a rate of almost $100 billion a month is also expected. This is a significant policy tightening. However, the situation with falling GDP raises the question of how willing is the Fed to ignore the new facts and continue to fight inflation?Oil holds steady above $100. Brent is trading at $109, despite US market problems. Oil is supported by the crisis in eastern Europe.Over the weekend, there were reports of a significant slowdown in China's economy due to a new Covid-19 outbreak.A Hungarian spokesman said his country would block any new sanctions against Russian oil and gas if they could limit supplies to Hungary. Decisions on sanctions are taken in the EU only by consensus. The support of all EU members is needed.Germany published weak retail sales reports for March. The volume of sales fell by 2.7%. This is probably a reaction to higher inflation.The Manufacturing ISM report will be released today. The Non-Manufacturing ISM Report will be released on Wednesday. On Friday, non-farm payrolls will be published.USDX is trading at 103.30 and is expected to be in the 103.00–103.60 range.USDCAD is trading at 1.2870. A break above 1.2900 is likely. The pair gained significantly on Friday. There was a very strong bullish reversal to the upside.The US market could start to rise if it receives support from the Fed.There is no news of any notable advances by Russian forces in eastern Ukraine. About 100 civilians were withdrawn from Mariupol yesterday. Today there is hope for a continuation of the release of civilians from Azovstal. Negotiations are at a standstill.Kiev gets new support from the West. Nancy Pelosi visited Kiev over the weekend. She promised strong support.In my opinion, there will be an important turning point in the conflict on May 5-7. If the Kremlin does not try to mobilise, I believe the conflict will end on June 1-15.
