US Update: Navarro’s gaffe, PMI Rally, Oil momentum builds, Gold surging

After a chaotic hour overnight, White House Adviser Navarro’s gaffe was quickly refuted and clarified, allowing the US stock rally party to continue.  President Trump’s quick response to confirm the China trade deal is fully intact, told financial markets that he won’t follow through on any of his threats until after the Presidential election. 

Risk appetite is in the driver seat after global PMI data showed the economic comeback is well underway and mostly topping expectations.  US investors got the best reading possible, PMI data strongly rebounded, but didn’t outperform like Europe, calming any thoughts that maybe fiscal and monetary authorities may not keep the stimulates floodgates open.  Housing data also impressed despite much of the country still in lockdown.  The housing market still looks good as home equity prices are near highs and as delinquencies are fairly low. 

The world is welcoming the softer dollar right now, but a complete rout is far from happening until investors are convinced that developing nations have the coronavirus under control.

Oil

Oil prices overnight survived some unnecessary drama after White House trade adviser Navarro’s comments that the trade deal between Trump and China was over.   Oil prices were already looking vulnerable before Navarro’s comments, which were quickly refuted by White House adviser Kudlow and President Trump.  This morning, crude prices have recovered all of their losses from the Navarro’s confusing comments on trade and extended higher after global PMI readings made a compelling argument that crude demand is continuing to improve. 

West Texas crude pared gains after the US PMI rebound wasn’t as sharp as Europe’s string of strong beats.  Yesterday’s lesson for energy traders is that the oil prices need a healthy relationship between the US and China. 

Gold

Gold prices are breaking out higher as investors quickly return to risky assets after global PMI readings point to a quicker economic recovery from the coronavirus pandemic.  This latest risk rally is driving the dollar down and that is good news for gold prices.  Gold especially enjoyed he US PMI readings, a strong rebound that did not top expectations, supporting the idea that fiscal and monetary officials need to keep the stimulus coming. 

Trade tensions, second wave concerns, the 10-year real yields (TIPS) decline deeper into negative territory, and taper tantrum risks will continue to support bullish calls to reach $1800 in the short-term and eventually record high territory later this year. 

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