Global equities trade mixed on conflicting signals from Sino-U.S. trade war related proceedings. US macro data in focus.
Summary: Asian market saw key risk assets – equities and benchmark indices decline sharply as safe haven demand remained high in Asian market hours. Wall Street yesterday saw early declines reversed on positive cues from gains in energy and financial sector shares. But Wall Street cues had little to know the effect in Asian market. Escalating internal woes on Hong Kong protests also weigh down investor sentiment in Asian markets. Following cues from Asian markets, European market also saw key stocks and indices opened dovish weighed down by Brexit and recession woes. However, rally in Italian stocks and positive comments from China on its trade-related talks helped improve risk appetite of the investors. This helped provide market bulls with a fresh burst of strength and positive influence resulting in major indices and stocks reversing early declines and post gains to some extent. USD remains weak owing to decline in US T. Yields and this has helped major forex pairs to gain positive momentum in the global forex market today.
Precious Metals: Both Gold and Silver are trading positive in the global market today with the price heading well near yearly highs as safe-haven demand remains high in the global market. Internal political woes from China, global recession worries and prolonged trade war-related concerns helped underpin demand for safe-haven metals keeping precious metals well in bulls territory.
Crude Oil: Crude oil price continues to trade positive in the global market today as US EIA weekly crude oil stockpile data also saw a sharp drop in stockpile following release of API weekly stockpile data. This helped supply to demand ratio for crude oil consumption demand lead in favour of Crude oil bulls. Further, news of possible trade talks between China and USA also helped boost the crude oil price.
AUD/USD: The pair initially reversed recent declines and rose to neutral levels on China’s trade talk related comments. Further in the day, as risk appetite boomed in the global market, AUD bulls gained momentum scaling fresh intra-day highs moving above 0.6750 handle. Also USD’s weakness influenced by a decline in US T.Yields helped AUD bulls gain momentum in its positive price rally today.
On The Lookout: Bonds reign supreme when the overall direction of investor fund flow is taken into consideration. While European market continues to provide some level of strength to global market bulls and provide some relief to investor woes, a great part of global investors’ funds are still heading towards the direction of safe-haven assets. Risk aversion remains steady as the outlook for global economic growth remains dovish on geo-political cues be it from Brexit or Sino-U.S. trade war or internal political climate from EU and China. While bond yields in the global bond market may flirt with record low levels, demand for bonds continues to rise with each passing day. On Sino-U.S. trade war front, China stated that it is hoping US will create suitable conditions required for face to face trade talks between representatives of the two nations which helped ease investor concerns to some extent. But concerns still linger as US officials today went through with the official process to bring into effect additional 5% tariff on US$ 300 Billion worth of Chinese import goods which are set to go into effect from September 1, 2019. On Brexit front, UK PM Boris Johnson decided to suspend parliament for a month before the Brexit deadline to limit possibilities of opposing MP’s derailing his no-deal exit plans. This leaves opposing members with just an option of no-confidence vote which they are unlikely to win as Boris had made sure to make his side strong as soon as he took command to ensure he doesn’t repeat former PM Theresa May’s mistakes.
Trading Perspective: As USD remains weak on declining US T.Yields which reinforcing recession woes in US economy, major global forex currency pairs are likely to continue trading positive in the global market. Meanwhile, Trump Administrations efforts to go ahead with Tariff imposition ahead of upcoming trade talks also added to investor woes in the global market offsetting relief from positive cues on Chinese comments. US Futures trading in international market ahead of Wall Street market opening saw positive action on cues from Chinese comments. But cues from US don’t seem to be optimistic. This suggests US Wall Street is likely to see neutral opening and proceed further based on local cues. On the release front today, US economic calendar will see release of Initial jobless claims, Goods trade balance, Preliminary GDP data and Pending Home sales data and Canadian economic calendar will see release of Current Account data during North American market hours. On the earnings calendar, US market will see financial data release from Best Buy, Cooper, Dollar General, Ulta Beauty and Workday.
EURUSD: The pair is trading well near weekly lows above mid-1.10 handle despite prevalent risk on investor sentiment as EU area macro data was highly disappointing. But the decline was capped on positive investor sentiment and USD’s weakness in broad market helping EURO bulls sustain its rally. Traders now await US macro data for short term directional cues and profit opportunities.
GBPUSD: The pair is trading positive today slightly higher than previous session lows but GBP bulls still remain under pressure owing to Brexit related developments as Boris’s decision to suspend parliament a month ahead of Brexit deadline increased and strengthened the possibility of no-deal Brexit outcome. But weak USD helped cap declines while traders await US data for short term profit opportunities.
USD/CAD: The pair is trading in zig-zag manner moving between 1.330 handle and 1.327 handle as CAD lost some of the strength owing to pull back in crude oil price mid-day. However, Crude oil price managed to stabilise and trade positive causing CAD to retain upper hand combined with USD’s weakness preventing pair from gaining foothold above 1.33 handle. Traders now await US and Canadian macro data for short term profit opportunities.
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