Bear’s Territory

Fresh Geo-Political Woes Plunge Global Equities into Bear’s Territory

Bear’s TerritoryHong Kong Protest, Italian & Argentina Political woes affect stock market activity, US CPI data in focus.

Summary: Global stock market today saw major benchmark indices and key stocks decline sharply influenced by fresh geo-political woes. Aside from the usual Brexit and Sino-U.S. trade war woes, decline in Argentina Peso influenced by election results and stock market rout, protests in Hong Kong over proposed extradition bill escalating to new highs and protestors blocking Airport caused Asian markets to see significant loss today. Cues from Asian market carried forward into European session causing European equity market to see dovish opening. Further, risk aversion and cautious investor sentiment influenced by cues from European political climate added to dovish influence in the market causing major benchmark indices, key equity stocks and risk assets to decline sharply while safe haven assets continued to grow stronger. Risk aversion fuelled sell-off in forex market has finally managed to offset cues from US markets causing USD to grow stronger affecting price dynamics significantly.

Precious Metals: Both Gold and Silver are trading with considerable fundamental support on increased demand for safe haven assets. The price of yellow metals has scaled new multi year highs scaling past $1530 handle and hitting intra-day high of $1534.31 per ounce the highest since April 2013 which is a clear sign that risk aversion is at its peak for the year currently.

Crude Oil: Crude oil futures trading in the international market saw significant downside move as growing geo-political woes hurt demand outlook on worries surrounding possibility of slowdown in economic growth. Further spike in US Shale output is starting to offset OPEC led supply cut move affecting demand to supply ratio supporting crude oil bears.

USD/JPY: The pair is trading with positive bias today despite increasing demand for safe haven demand which underpins JPY as USD also gains momentum from sell-off surrounding major global currencies. As USD comes back under shadow of safe haven it is beginning to offset demand for JPY preventing possibility of decline below $105 handle in trading session today.


On The Lookout: As fresh developments continue to influence price action of local and international markets in both emerging and major global economies, risk aversion continues to increase with each passing day. Intra-day activity is more often than not affected by local cues instead of influence from major geo-political events. The outcome of Sino-U.S. trade negotiations and Brexit have already been priced in by most investors in short term preventing the market from seeing major moves over minor headlines relating to the two above mentioned events. On Brexit front, Boris Johnson has promised to move ahead with no-deal exit if EU doesn’t budge while quoting importance on need for free trade agreement. On a surprising move, US national security adviser John Bolton extended a supporting hand stating that US is ready to seek a free trade agreement with UK in case of No-deal Brexit scenario making things difficult for EU while Boris Johnson’s strength grows. US decision to delay tariff plans for China also helped limit declines given the bout of bearish factors domination price action in the global market today. Moving forward, traders await US CPI data and API weekly crude oil data for short term profit opportunities.

Trading Perspective: Dovish investor sentiment on geo-political cues caused US stock and index futures trading in international market to decline sharply. Pro-longed trade war woes and influence from international markets are likely to influence dovish cautious risk averse investor sentiment which suggests US Wall Street is likely to see subdued opening and dovish price action in the global market today.

EUR/USD: The pair is trading in red today as Euro is suffering dovish influence from global self-off of major currencies and risk assets and dovish EU macro data outcome. Further, rebound in USD’s strength is also weighing down the pair causing the price to decline below 1.12 handle. Traders now await US CPI data for short term directional bias and profit opportunities.

GBP/USD: The pair is trading flat in the global market today as news hinting US support for no-deal Brexit with comments on signing free trade deal with UK underpinned GBP bulls along with US decision to delay tariffs on China while rebound in USD capped gains offsetting positive cues. Traders now await US CPI data for short term directional bias and profit opportunities.

USD/CAD: The pair traded with positive bias in the global market on rebound in USD strength and CAD’s weakness. However, Canadian Loonie the commodity linked currency gained momentum on spot US Crude oil price rebound in late European session causing pair to decline from intra-day highs. Traders now await US CPI data for short term directional bias and profit opportunities.

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