US Open – Rally Mode Continues, Oil rises, Gold steady

Global indexes are higher across the board after US Commerce Secretary Wilbur Ross signaled the phase-one trade deal would be finalized this month and that European automakers might not see tariffs following “good conversations”.  Ross noted that if a final deal between the US and China is reached, it would be signed in the US.  Technology firms are eagerly awaiting the passing of this first deal as it will green-light the ability sell components again to China’s Huawei Technologies Co.

While the US trade updates were mostly reiterations regarding China, the Trump administration’s softening stance on delaying new tariffs on EU carmakers is driving optimism investors may not see fresh tariffs on European autos at the November 17th deadline.  While the EU maintains their position that their cars are no a threat to national security, investors are starting to believe that President Trump will extend this deadline to avoid punishing the US consumer.

Fresh record highs seem likely, as US stocks rise on continued momentum from last week’s blockbuster employment report and this weekend’s trade optimism.

Oil

Oil is climbing higher on trade progress and after Saudi Arabia pulled the trigger on Aramco IPO.  While Aramco’s IPO is a key component of Prince Mohammed’s Vision 2030 plan to help the kingdom diversify away from oil, they will need higher oil prices in the short-term to secure a strong launch.  Saudi Arabia basically just went all-in on delivering higher oil prices.  The timing of the IPO announcement could suggest we should expect deeper cuts from the OPEC + meetings in early December.

Positive rhetoric in both the US-China trade war and the transatlantic one will help improve demand forecasts.  Oil is reacting more to the possible de-escalation in the upcoming November 17th deadline for US tariffs on European automobiles.  Trump seems to be in election mode and will likely continue to do everything he can to have the economy running on all cylinders.

Gold

Gold prices are playing tug-of-war with investors as markets remain concerned about earnings, but more optimistic that we will see more assuaging headlines regarding trade.  Despite a strong outlook for US stocks, gold remains well supported on plethora of macro risks.  Too many global political risks, such as Hong Kong protest or Argentina’s inevitable default, exist and even if trade becomes a nonissue, investors will want to have gold as part of their portfolio.

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