US Open – Trade War Impact, Brexit relief, OPEC, and Gold

US stocks are looking at modest higher as increased stimulus bets are likely following last week’s softer than expected non-farm payroll release and dismal Chinese data. 

Further easing bets by the PBOC are skyrocketing as the US-China trade war continues to weigh on China’s economy.  August Chinese trade data showed exports posted a surprise drop, which suggests exporters are not front-loading sales.  The data will start looking like a trainwreck when the 15% and 30% tariffs take effect.  The trade war is at a critical juncture where Beijing will need to decide if they want to deliver more stimulus to accommodate a slowing economy or should they first focus on delivering enough concessions to the Trump administration to support a de-escalation of the recent round of tariff threats.    

Brexit

The British pound reversed earlier losses after UK PM Boris Johnson reportedly signaled to cabinet ministers the government would have to accept a further three-month delay to Brexit if the courts forced him.  Johnson still may try to sabotage any extension, but for now, sterling is continue to stabilize here. 

OPEC

Khalid al-Falih appears to have fallen out of place with the kingdom, perhaps its primarily with how low oil prices have been despite all the Saudi-led production cuts.  Al-Falih will be replaced as the Saudi energy minister, a signal that we could see a possible shift in strategy at the September 12th OPEC+ strategy meeting in Abu Dhabi.  His replacement, industry veteran Prince Abdulaziz bin Salman is seen as very capable to maintaining all the relationships, especially the one Al-Falih brokered with Russian energy minister Novak.  Last week Al-Falih was removed at Chariman of Saudi Aramco. 

The new energy minister, Abdulaziz is half-brother to the Crown Prince Mohammed bin Salman.  We could see this move suggest will see more pressure from the Saudis for OPEC + to stabilize prices with further cuts. 

Gold

Gold prices are slightly higher as demand for safe-havens have tentatively eased up.  It seems gold will continue to rise with massive stimulus measures that will stem from bad news with the global economy.  Gold could struggle this week if we don’t see a clear path for lower rates and the expansion of bond purchases by the ECB.  With many of the ECB hawks becoming vocal, a sign that could mean they are ready to concede on Thursday, we could see this rate decision deliver a strong dovish message that will include steps for QE2. 

Gold’s bullish trend has had many pullbacks and the current one might not be over with.  Today’s move higher is hardly a rally and could fizzle out.  Key support for gold remains the $1,470 to $1,500 zone. 

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