Equities Mixed as Chinese Cues Dictate Directional Bias, US Futures Green on Rate Cut Hopes

Summary: Global equity market is seeing mixed price action in the global market today. Lack of progress in Sino-U.S. trade talks, increasing awareness that trade deal between two parties is unlikely in the upcoming G20 summit and headlines on massive street protests act as factors which provide the market with bearish cues. This has resulted in investor sentiment remaining divided in the global market. Further, the reduction in 2019 global crude oil demand growth forecast by OPEC also hurt risk appetite. While trade tensions and crude oil woes influenced European market to open in red, the surge in telecom shares over Germany’s announcement of completing its 5G mobile spectrum auction helped market retain some level of positive activity in the market. However, fundamentals remain shaky at this point in time. Forex assets display a high level of bearish influence showing the impact of headlines on investor sentiment and risk appetite in Asian and European market so far today.

Precious Metals: Both gold and silver are trading positive in the global market today given divided investor sentiment and prevalent cautious tone over the trade war and crude oil woes. Reduction in crude oil demand growth forecast, news of the attack on gulf crude oil tankers also affected market price activity, favouring demand for safe-haven assets.

Crude Oil: The liquid gold declined to 5-month lows earlier today as news of OPEC’s reduction in crude oil demand growth forecast for the year ahead took the wind out of bulls. However, news of the attack on gulf tankers, crude oil shipments amid ongoing supply to demand scenario helped black gold regain positive price action in spot and futures markets.

AUD/USD: The pair fell sharply earlier in the day over disappointing Australian unemployment data resulting in bulls waging strong war for control of price action near the 0.69 handle. While the pair has managed to stabilize near the 0.69 handle in the late European session, dovish cues from China resulted in bulls losing the edge and pair trading with strong bearish bias in the global market.

On The Lookout: Geo-Political issues take the center stage of investors’ attention today. While Sino-U.S. trade war-related updates continue to garner more attention and have a high impact on the market, all eyes are now on UK political proceedings. Given the fact that China won’t budge regardless of USA’s threatening tactics, it has become increasingly clear to investors across the globe that this issue is going to go into the long term.

rate cut
UK political proceedings

Meanwhile, the top 10 PM contenders in the UK for the role of PM are facing the first secret MP ballot today and any candidate failing to secure a minimum of 17 MP votes in their favor will be ousted from the race. The main point here is that, regardless of who succeeds, UK seems to be on a path for hard Brexit once the PM candidate is decided and the possibility of such an outcome is a cause of great concern in the global market. Aside from geopolitical events, traders await macro data updates for short term profit opportunities.

Trading Perspective: The directional bias for price action in US Wall Street seems to remain in favor of market bulls for now. US stock and benchmark index futures trading in the international market gained positive momentum over energy share led gains post sharp surge in crude oil price. While news of the attack on crude tankers in the Middle East managed to outweigh market bears for now and influence from fed rate cut expectations provide some level of fundamental support. But any provocative remarks or comments from President Trump could still push market fundamentals in favor of bears later today. However, a lack of any such comments would suggest that bulls will retain control over price action.

EUR/USD:  The common currency has lost its upper hand against US Greenback despite the latter remaining weak on dovish fate rate decision expectations. As Sino-U.S. trade war woes hurt risk appetite in the market, lack of support from macro data updates amid mixed investor sentiment in the global market led to the pair trading in red while traders await US macro data for directional bias.

GBP/USD: The British Pound is facing sharp loss as the first round of vote on PM replacement decision in UK parliament takes place today. As traders await results of the first round of the election, increasing odds surrounding Brexit causes the pair to remain in bear’s territory. Traders now await UK headlines and US macro data updates for short term profit opportunities.

USD/CAD: The pair is trading in favor of Canadian Dollar as Crude oil price surged sharply in the global market. Price of crude oil went up by more than 4% despite OPEC’s reduction in demand growth forecast for the year ahead as supply woes increased on news of the attack on crude oil tankers in the Middle East. Further, weak USD on dovish fed rate decision bets also favor CAD bulls resulting in pair trading in red. Regardless of US trade data outcome later today, the pair is likely to trade in red across US market hours on positive crude oil price.