Equities Decline on Dovish Data & Trade War Woes, US Prelim PMI Data in Focus

Equities Decline on Dovish Data & Trade War Woes, US Prelim PMI Data in Focus

Equities Decline on Dovish Data & Trade War Woes, US Prelim PMI Data in Focus

Brexit uncertainties, mixed cues on trade talk proceedings, escalating middle east tensions weigh down risk appetite in the global market.

Summary: Global stock market is suffering sharp declines today as cues from geo-political events and disappointing economic data pressured market bulls and weighed down investor sentiment. While US white house representatives and Chinese officials last week commented that trade talks between both parties were constructive and productive, comments from US President Donald Trump stating that he is not looking for partial trade deal and Chinese representatives decision to cut short their trip cancelling extension plans invoked mixed signals from traders and investors across the globe. Further, escalating tensions in Middle East with US imposing new tariffs on Iran and ordering increased troops and deployment to the Middle East in a measure to boost Saudi Oil facilities defence against air and missile attacks which are viewed as precursor to war greatly hurt investor sentiment in the global market. In European market, worse than expected macro data outcome from Germany and France economic calendar along with weak business survey data affected investor sentiment resulting in European equities declining sharply similar to Asian stock market. In forex market, there was some level of risk on trading activity as evident from decline in safe-haven currencies but gains of major global currencies against USD were capped as an end to trade war or even a temporary cease-fire doesn’t seem to be on the cards anytime in near future.

Precious Metals: While USD saw some level of positive price action in the global market and safe haven currencies declined, precious metals saw positive price action. The positive price action in rare metals market was influenced by cautious investor stance on account of escalating tension in the middle east and mixed signals surrounding trade war between US and China.

Crude Oil: Crude oil also commonly considered as liquid gold is seeing highly active trading activity today given sharp news-driven price swings. While Crude oil holds on to some of gains made in previous week on account of increasing tensions in Middle East, the gains were capped and there was some level of decline on news of Saudi’s plans for restarting full capacity oil production activities earlier than expected.

AUD/USD: The pair is seeing consolidative price action today post a 100 pip decline in price action last week. However, the price action was contained well above mid -0.67 handle as either side lacked the strength required to make a solid breakout with a strong directional bias. However, escalating trade war woes and increasing cautious among traders could push the pair below 0.6700 handle in near future if the pair fails to regain hold above 0.68 handle.


On The Lookout: Geo-Politics will continue to remain as the main driving force behind price action of global financial market this week. In trade talk between China and US, there are mixed signals as officials representing the governments hint at constructive talks while US President Donald Trump’s comments come as a blow. Tensions in Middle East are blowing sky high as the US sends additional troop in name of defence for Saudi Oil facilities while imposing new sanctions and announcing that Saudi is set to declare official retaliation on Iran for attack on Oil facilities later this week. On Brexit front, opposing party leader Jeremy Corbyn faces his own battle on the party’s Brexit related policy preventing him from focusing on PM Boris Johnson as comments from EU members hint at catastrophic disaster for both economies. Spain has stated that it will remove rights for British residents in the country post Brexit if UK doesn’t reciprocate in kind which will affect more than 300,000 UK citizens staying in Spain. Further, Auto manufacturers warn of seismic job and financial losses in event of no-deal Brexit which will greatly affect both economies. This has caused investor sentiment in European market to turn cautious as they worry about economic outlook. In immediate future, traders await ECB President Mario Draghi’s speech to know his stance on stimulus measures its impact on Euro economy and impact of no-deal Brexit on Euro.

Trading Perspective: Forex market is likely to continue mixed activity in North American market hours on account on prevalent caution in the global market. US stock and index futures trading in the international market were muted ahead of Wall Street opening following Wall Street’s worst closing in two weeks last Friday. These factors suggest US Wall Street is likely to see dovish price action in trading session today. On economic calendar release front, US calendar is likely to see release of Preliminary Manufacturing, Services and Markit Composite PMI and speech from FOMC members Bullard and Williams while Canadian calendar will see release of Wholesale Sales data.

EUR/USD: The pair is seeing serious loss today as Euro bulls suffer onslaught of bearish influence from multiple directions. Cautious investor sentiment, no-deal Brexit outcome warnings, trade war woes and risk off investor sentiment along with worse than expected macro data has pushed the pair below 1.10 mark today. Traders now await US macro data for short term profit opportunities.

GBP/USD: The pair is seeing sharp loss today as GBP is pressured by increasing odds of no-deal Brexit outcome. Spain’s ultimatum to UK and warning from EU automakers on impact on no-deal outcome on Job market and economic growth combined with internal political scenario where opposing party members stand divided leaving Boris to push forward with his proposition has weighed down GBP considerably. Traders now await US macro data for short term profit opportunities.

USD/CAD: The pair is trading positive in the global market as USD gained momentum over sell-off surrounding major global currencies. Further, impact of mixed signals on trade talk proceedings combined with declining crude oil price albeit escalating tensions in Middle East affected commodity-linked currency Canadian Loonie negatively. Traders now await US & Canadian data for short term trading cues.

Please feel free to share your thoughts with us in the comments below.