European Market Dovish & Wall Street Opens Flat on China-U.S. Tensions

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

global equities

Wall Street to Open Flat on China-U.S. Tensions

May 23, 2020

China’s move to enforce new security 

US-China trade tensions

Summary: The European equity market today saw the dovish activity as risk sentiment was hammered by escalating China-U.S. tensions, which in turn has fuelled concerns of a slowdown in global economic growth activity. Concerns of resurfacing covid-19 outbreak as major global economies re-open following relaxed lockdown measures have also caused risk assets to lose some of its gains from early this week.

The majority of the loss in the European market was led by a decline in Banks and Luxury sector stocks. Tensions in the global financial market are once again rising as Beijing has imposed a new security law in Hong Kong, which along with President Trump’s accusations of China mishandling the covid-19 outbreak, suggests risk sentiment is going to remain under considerable stress for the foreseeable future. 

Precious Metal: Rare metals are trading mixed in the global market today. Profit booking activity has caused silver to decline from weekly highs on the last trading session of the day. However, gold continued to trade positive as rising tensions between China and the US over new security law and covid-19 outbreaks underpinned safe-haven demand. 

Crude Oil: Crude oil price has finally stopped its consecutive sessions of gains as escalating geopolitical tensions have finally affected the global economic outlook. While declining US weekly stockpile greatly helped improve demand outlook, declining economic recovery hopes over escalating Sino-U.S. tensions have caused major benchmarks to slide from weekly highs. 

DXY: The US Dollar index, which measures the strength of Greenback against six major global currencies still remains trapped in the 99 mark but has moved above 99.500 range given increased risk aversion in the global market today. 

On The Lookout: China has once again resumed its crackdown in Hong Kong, and this time around, it has imposed a new security law for the special autonomous regions. The draft of this law suggests that this move may possibly lead to the revival of pro-democracy protests in the city. A revival of protest would give the US another reason to argue with China, aside from the covid-19 outbreak given events from the recent past. This has caused investor risk sentiment for the foreseeable future to remain highly clouded. On the release front, US Calendar sees the release of U.S. Baker Hughes Oil Rig Count and Total Rig Count while the Canadian calendar sees the release of Core retail sales data. 

Trading Perspective: US Wall Street is set to see a muted opening for the day as escalating tensions between China and U.S.A escalates with each passing day diminishing economic growth outlook. However, hopes for more stimulus measures to aid the US economy is likely to cap sharp declines. U.S. Futures trading in the international market ahead of Wall Street opening displayed a clear dovish tone on the last trading session of the week. 

EUR/USD: As risk sentiment declined in the global market over diminishing hopes for economic recovery, EURO bulls lost momentum gained from Pairs-Berlin backed relief fund. This, along with the resurgence of USD strength over increased risk aversion in the market, caused the pair to decline below 1.09 handle. Traders now await cues from US market hours for short term profit opportunities.

GBP/USD: The British Pound suffered a major blow today as disappointing retail sales data added pressure to bulls, which is already suffering from Brexit and covid-19 woes. A recovery in USD’s strength aided by broad-based risk aversion also weighed down the pair causing the price to decline below the 1.2200 handle. Traders now await cues from US market hours for short term profit opportunities.

USD/CAD: The pair is trading positive in the global market as broad-based risk aversion and declining crude oil price in the market today helped USD gain strength while CAD lost some of its fundamental support. Traders now await the US Baker Hughes oil rig count and Canadian retail sales data for short term profit opportunities. 

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

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