Trade deal-related headlines amid renewed uncertainties and escalating tensions to drive price action in Wall Street today.
Summary: Global equities took a nosedive ahead of the trade deal meeting between China and the USA despite recent optimism on the latest comments from US treasury secretary Steven Mnuchin. While broad market expectations were the cancellation of Tariffs planned for December 2019 and partial rollback of tariffs currently under effect post singing of the trade deal, Mr. Mnuchin said that there wouldn’t be any rollback of older tariffs unless Phase 2 of trade deal is signed and China gives additional concessions. This stirred up fresh tensions in the global market.
However, sharp declines were prevented as headlines suggested that Phase 1 of the trade deal will be signed by President Trump and Chinese representative Mr. Liu He. While the market saw positive bias on the US decision to drop china from its list of nations that manipulate the value of USD, the latest update took the wind out of market bulls. This resulted in both Asia and European markets seeing major indices and equities trade with slightly dovish of flat bias. Trade deal uncertainties
Precious Metals: Rare metals saw a sharp upsurge in price action today, recovering from two consecutive sessions of decline. The sudden turn of events following comments from Mr. Mnuchin, which influenced a re-escalation of tensions surrounding the trade deal is the main reason for gains in rare metals today.
Crude Oil: Crude oil price continues to see a sharp decline in the global market as concerns of global economic growth outlook took a hit on renewed trade deal tensions, which affected demand to supply ratio. A spike in the US crude oil inventory also affected crude oil bulls resulting in the price of futures declining by more than 1% during the mid-European session.
AUD/USD: The pair is trading positive in the global market today as optimism surrounding trade deal and weaker USD in the global market underpinned AUD bulls. However, gains were capped, and pair failed to breach the 0.69 handle on renewed trade deal uncertainties following Mnuchin’s comment.
On The Lookout: The main focus of investors today is the trade deal meeting between China and the USA. Phase 1 of the trade deal set to be signed today will see china agree to buy US goods worth US$200 Billion per year over the next two years.
However, latest comments from Mnuchin which suggests that older tariffs won’t be rolled back post Phase 1 of the trade deal and subtle clues which suggest Phase 2 of the deal may extend well beyond upcoming US presidential elections is a major cause for concerns as it could still continue to inflict collateral damage on global economic growth. Traders also await complete details on Phase 1 of the trade deal once it is signed by both parties for clues on how the agreement is going to affect the economic activity of both nations moving forward.
On the release front, traders await US PPI data and speech from Fed Harker for directional cues. On earnings calendar front, Wall Street is set to see the release of earnings reports from Goldman Sachs, Bank Of America, NC Financial and U.S. Bancorp.
Trading Perspective: US stock futures trading in the international market was mostly flat on renewed trade deal uncertainties and caution ahead of today’s trade deal meeting. Cues from the international market and risk-averse tone in the global market mood suggest Wall Street is set to see a muted opening and subdued activity as traders await fresh headlines for directional cues.
EUR/USD: The pair displayed a generally bullish outlook in the short term as the trade deal is set to be signed today. But caution ahead of trade deal meeting and renewed uncertainties cap gains while weak USD underpins EURO bulls. Traders now await US macro data and trade deal headlines for directional cues.
GBP/USD: The pair is trading flat with bears gaining strength to control the momentum as disappointing UK data further boosted odds of a rate cut from BOE. However, broad-based USD’s weakness kept the pair from seeing sharp declines. Traders now await US data and trade deal headlines for directional cues.
USD/CAD: The pair tested upside earlier in the day, but broad-based USD’s weakness capped further upside move. However, weaker Crude oil prices and trade deal uncertainties prevented CAD from seeing gains either. Traders now await US macro data and trade deal headlines for directional cues.
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