US Open – October Meeting, UK Elections, Oil, Gold

US stocks are poised for a strong open after the world’s two largest economies signaled trade negotiations are set to continue at the highest levels in October, while lower level meetings will take place this month.

China’s Ministry of Commerce confirmed a phone call with leaders took place and that the face-to-face meetings will take place in October.  The US statement was not nearly as optimistic, failing to commit to an October meeting, but did highlight deputy-level meetings would take place in mid-September.  The US got burned in April and will likely maintain a cautious tone until they see substantial progress.   The US is set to turn up the tariff pressure again on October 1st and if we don’t see that threat taken off, markets will be skeptical that the October meeting likely not see anything meaningful happen and that the trade war will not be resolved until after the 2020 US Presidential election. 

UK

Boris Johnson went back to the drawing board after Parliament voted on a bill that would make him seek to extend Brexit talks from October 31st to January 31st if he cant secure a new deal or convince House of Commons to agree on a no-deal Brexit.  Johnson is expected to make a speech today that calls for public support for an election this side of October 31st.  Lawmakers rejection of PM Johnson’s strategy saw the British pound have its best rise in six months.  Cable is likely to see some further gains as no-deal risks have eased, but the longer Brexit takes, the worse off the UK economy will be. 

Oil

Oil did not see a significant rally following the Chinese announcement of trade progress, because the API report last night showed a surprise slight rise with crude inventories.  Today, the government’s official supply report is expected to see a draw of 2.6 million barrels.  Oil is likely to see stronger reactions to positive global economic data that will alleviate falling demand concerns.  In order for trade headlines to positively impact oil prices, a removal of tariffs or the upcoming deadlines would need to take place to see energy traders get excited.    

Gold

Gold prices declined following a fresh wave optimism after Chinese officials announced they will have high-level meetings in October.  We’ve been here before and will unlikely see safe-havens sold hard until we get meaningful de-escalation from both the Chinese and American tariffs.  Gold is also approaching an overbought level that is similar to the oversold moment we saw in 2013, which signaled another major move which eventually identified a key trading range.  The wrath of monetary and fiscal stimulus that will be coming from the world’s largest central banks are likely to be the key backstop for the next move higher with gold prices. 

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