US open – Trade, UK, Spain, Hong Kong, gold, oil

Markets off to a tough start

European stock markets are off to a disappointing start on Monday and US futures are eyeing a similar open as mixed trade war headlines leave investors frustrated and confused.

Source – Thomson Reuters Eikon

We all love a bit of transparency in the markets, forever keen to get that little bit of extra insight, something that will give us an extra edge. But the trade war headlines are just getting a little silly and investors are lapping them up each and every time. We swing from optimism to pessimism on a daily basis and never feel any-the-wiser.

This time it was Trump’s turn to pour cold water on suggestions that not only is a deal in the offing, but it comes with the cherry on top that is the removal of tariffs. It’s difficult to say who stands to lose more from this deal falling apart but this last minute jostling does not inspire confidence.

Sterling jumps on Brexit Party concession

The pound was given a boost by Nigel Farage’s announcement that the Brexit party won’t stand in the 317 seats currently occupied by the Conservatives. While this undoubtedly helps the Tories, it only does so to a limited extent as it still makes life hard in the seats it needs to secure a majority.

Moreover, if the Brexit party isn’t careful, they could split the vote in a number of the other seats and unintentionally hand victory to one of the remain/second referendum candidates. Sterling may be higher but a hung Parliament is still far more likely than if they focused on Brexit-backing constituencies that the Conservatives stand little chance of winning. I imagine this is still where they’ll put the most effort.

GBPUSD Daily Chart

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Negotiations starts after inconclusive Spanish election

The Spanish election looks to have to delivered the inconclusive result that everyone expected, with the Socialists getting the most seats but once again falling short of a majority. The IBEX is only off around 0.3% today, in line with what we’re seeing elsewhere on the continent. Negotiations will now take place over the coming week’s to avoid yet another election and I’m sure the rise of the far right VOX party may focus the minds of the mainstream parties and possibly deliver an unstable coalition.

Hong Kong protests weigh on Asia

Another weekend of protests in Hong Kong hurt sentiment in Asia overnight, with the scenes becoming increasingly violent and reports suggesting live rounds were fired by police, leaving one person in critical condition. The Hang Seng was worst impacted by the weekend’s event’s, slipping 2.62% on the opening day of the week, but it did weigh on the region as a whole. Trade headlines also didn’t help matters, dragging on Chinese stocks.

Gold pares losses but remains under pressure

Gold dipped slightly below $1,460 on Friday but continues to hover around these levels as pressure builds on the yellow metal. The breakout finally came last week and it was the bulls that eventually caved just as they appeared to be regaining some momentum. While $1,460 is providing some temporary support, this remains a very vulnerable level with $1,440-1,450 below here also interesting. Losses may be deeper in the coming weeks and months though.

Gold Daily Chart

Oil volatile on regular trade headlines

Oil continues to be closely tied to the regular and varying trade headlines that are flowing out leading to volatile sessions like we saw Friday, where sentiment changes suddenly on a tweet or leak. Oil prices are around 1% lower today but momentum is very much with the bulls as the US and China edge closer to a deal, possibly one signed here in London early next month. As ever though, it feels a lot can happen to scupper any agreement in the interim.

Brent Daily Chart

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