US Close – Risk rally resumes as Trump walks fine line, Oil extends higher after phase-one deal left alone, Gold softer post Trump

Risk appetite remained intact after President Trump did not hit China with fresh tariffs or end the phase-one trade deal. Financial markets reacted positively after Trump laid out a series of policies that did not surprise financial markets. Today was just another round between the US and China in what will be a long war that will easily go well beyond the Presidential election.

Trump followed up with his threats to the WHO with the announcement the relationship will be terminated.  Trump told his administration to revoke Hong Kong’s “preferential treatment” under U.S. law.  The US will launch a working group to study differing practices of Chinese companies listed on US stock markets.  Some Hong Kong officials will be sanctioned and action will be taken to stop entry of some foreign nationals.   Trump’s seriousness was noticeable as he solely focused on his statement and did not take any questions.

Oil

Oil prices extended gains after President Trump did not deliver any new tariffs on China or uncertainty that the phase-one trade deal was dead. Trump’s harsh comments over the handling of the coronavirus or Hong Kong’s autonomy was nothing new for energy markets.  Crude prices extended gains after not receiving any news from the Trump presser that would cripple the demand outlook immediately.

WTI crude’s best month on record is ending on a positive note as further reopening announcements continue to support hopes that Europe and the US will finally start to have noticeable better consumption prospects in the coming weeks.

Gold/Dollar

Gold prices pulled back after President Trump was able to walk a fine in delivering a harsh tone on China and refrained from slapping fresh tariffs on China or ending the phase-one trade deal.  Both the dollar and gold slumped following Trump’s comments that did not unveil any surprises.  US-Chinese tensions are not going away anytime soon, but it seems a complete deterioration is unlikely as both countries have fragile economies that can’t handle any additional shocks.  Trump’s China response does not change the bullish outlook for gold.

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