The US dollar index fell from a four-week high to 96.6 as Euro, sterling and JPY rebounded overnight.

The softening dollar led to a boost in gold prices, which climbed to a US$ 1,300 level. Crude oil prices extended gains to a five-month high, backed by concerns of a supply strain in Libya, Venezuela and Iranian sanctions.

The S&P 500 index hovered around 2,895 points – just 45 points beneath its record high level – as investors carefully assessed the current valuation against the backdrop of a gloomy global economy. The US factory orders declined 0.5% month-on-month in February, according to the Commerce Department, slightly better than the consensus forecast of a 0.6% drop. The data suggests that weakness in the manufacturing sector prevails, partly due to detrimental trade tariffs imposed since mid of last year and a synchronised slowdown in global demand for machinery, electronic products and equipment.

The S&P 500 is trading at around 19 times trailing P/E, a meaningful rebound from December’s low of 16 times but still lower than 23 times seen in early 2018. The upcoming earnings season will paint a clearer picture of the impact of trade tariffs and global slowdown to US corporate profits. Given slower PMIs and retail sales readings in the recent month, the odds probably bias towards negative surprises.

Sector wise, energy (+0.49%), consumer staples (+0.43%), Information Technology (+0.41%) sectors leading the gain whereas utilities (+0.73%), real estate (-0 51%) and industrials (-0.44%) were lagging. Apple’s resurgence back to the US$ 200 mark lifted the Nasdaq Index, while Boeing (-4.4%) dragged the Dow lower.

For Brent oil, US$ 72.5 - a 61.8% Fibonacci Retracement level - remains a key resistance in the near term. The overall trend is still bullish, but momentum indicators RSI and DMI have flagged risk of ‘overbought’ in the near term. A potential pullback cannot be ruled out should any key production countries increase output. In fact, the Baker Hughes rig count shows that US oil rig numbers have increased by 22 last week, suggesting that the higher oil price is incentivizing more drilling activities.

US Factory Orders - MoM

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.