On Saturday, January 17, President Trump announced 10% tariffs on Denmark, Finland, Norway, Sweden, France, Germany, the Netherlands, and the UK. The tariffs take effect on February 1, if no agreement is reached, and rise to 25% on June 1.
Denmark has reportedly deployed more troops to Greenland following Trump’s tariff threat and comments on January 19. However, it remains to be seen whether this will be enough to placate a US President keen to take full control of the territory.
The threat of an all-out trade war exposes US companies to sanctions. According to The Guardian:
“EU leaders have threatened to deploy the bloc’s anti-coercion instrument (ACI) – widely known as the “big bazooka” – which was devised to give the EU more powerful tools to respond to political bullying and trade blackmail from another country.”
The ACI enables the EU to introduce trade sanctions, including export restrictions, end protections on intellectual property, and exclude companies from its internal market.
Crucially, US-EU trade developments will be pivotal for the cautiously bullish short-term and constructive medium-term outlook for US index futures.
US Labor Market and Earnings in Focus
US futures fell sharply during the Asian morning session on January 20. The Dow Jones E-mini and the Nasdaq 100 E-mini tumbled 427 points and 267 points, respectively, while the S&P 500 E-mini fell 64 points.
Later Tuesday, US labor market data will influence sentiment toward the Fed rate path. The ADP’s weekly employment report will give insights into labor market conditions. Weaker data would likely boost demand for US stock futures.
However, earnings reports will likely be key for the session ahead. Netflix (NFLX) will release its Q4 earnings. Netflix’s updates on its plans to acquire Warner Bros. Discovery and the company’s outlook are likely focal points. Importantly, topping estimates would boost demand for tech stocks and align with optimism over Q4 earnings, key to the bullish short- to medium-term outlook.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Despite the morning losses, the Dow Jones E-mini and the S&P 500 E-mini remained above their 50-day and 200-day EMAs. The EMAs indicated a bullish bias, aligning with positive fundamentals. However, the Nasdaq 100 E-mini traded below its 50-day EMA, signaling a bearish near-term bias.
Near-term trends will hinge on US-EU trade headlines, earnings, and US economic indicators. Key levels to monitor include:
Dow Jones
- Resistance: the January 13 record high of 49,901, and then 50,000.
- Support: 49,000 followed by the 50-day EMA (48,364).