European update – US/China, earnings, gold, oil

Investors Relieved But Not Blown Away

European stock markets are a little flat again on Thursday, with the US-China signing ceremony a day earlier failing to provide much excitement or spark another rally.

Source – Thomson Reuters Eikon

In a way, it’s a relief that we haven’t seen the signing of the deal act as a profit taking trigger. The rumour was bought but the fact not sold, as it where. It feels quite strange that after so many months of the trade war dominating the headlines, investors seem a little deflated and lost rather than excited and optimistic.

That’s an odd thing to say when stock markets are at record highs but we’re now in a weird limbo between a deal that papers over cracks and a full comprehensive deal that may take years, if it comes at all. There’s relief at the situation progressing in a positive way that removes some uncertainty but disappointment at the same time that tariffs remain in place and will for the foreseeable future.

Thankfully, earnings season will provide a handy distraction and may give investors reason to feel cheerful and bullish, even at these levels. It’s got off to a mixed start but I feel that may be the theme for much of the next few weeks.

Gold stuck in a tight range

Gold is continuing to trade in a tight range between $1,540 and $1,560. Both of these levels have been tested at least one over the last week and are currently holding strong. The trade deal signing ceremony has come and gone without having much of an impact on gold prices which means focus switches to earnings season and whether the stock market rally can be sustained, or if there’s something else to worry about this year. A strong showing could further lift sentiment and weigh on gold prices in the coming weeks but, as things stand, we’re in wait and see mode.

Gold Daily Chart

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Oil settles after EIA plunge

Oil prices have found their feet after an eventful start to the year, to put it mildly. Brent has settled above $64 after another volatile session on Wednesday. Oil prices sunk on the release of the weekly EIA report but that didn’t last long and prices quickly returned to the levels they found themselves at earlier in the day, which is where we find ourselves now. Markets are desperately crying out for another catalyst at a time when most central banks are taking a step back and geopolitical tensions are easing. Perhaps earnings season can be that spark.

Brent Daily Chart

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