Risk appetite quickly disappeared after President Trump announced he would address China tomorrow at a press conference. It didn’t take much to help traders rush to exits. Aggressive short positions have been growing for the S&P 500 index and it seems intensifying tensions between the US and China will be the catalyst to derail some of the reopening momentum that drove a vast majority of stocks higher.
This is not just a US-China spat, as the rest of the world is showing frustration over Beijing’s decision to impose a national security law in Hong Kong. The UK, Australia, Canada, and United States issued a joint statement formally expressing their concern over China’s actions.
Wall Street is getting nervous that President Trump could be quickly nearing the nuclear option of fully revoking special economic and legal privileges granted to Hong Kong. This was always a fear, but it didn’t seem like that would be an option this side of the Presidential election.
Oil
Oil prices pared gains after President Trump’s press conference announcement. For the crude demand outlook to continue to improve, the energy market needs China and the US to get along. Oil prices have been rising higher as reopening momentum continues to support calls for an improvement with demand. The oil market is still working its way to balance and could be vulnerable to the downside on any hints that oil-producing nations are quickly ramping up production.
Gold
An imbalance issue for gold at the New York exchange is providing an unwanted headache just like we saw with oil last month. Steep discount with future contracts are happening as lockdowns make it harder for delivering supplies. Investment demand is strong for gold, but delivery is not what these investors want. Gold will not see a historic plunge, but could see limited upside with the escalating tensions between the US and China.
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Ed Moya
His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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