European open – ECB, Trade war, gold, oil

ECB and Trade Headlines Buoy Investors

Europe is off to a positive start on the final trading day of the week, as stocks continue to reap the rewards of a massive ECB stimulus package and, perhaps, a step forward in the trade war.

Source – Thomson Reuters Eikon

In his penultimate meeting in charge, Mario Draghi once again became the face of the resistance as the central bank fought back against an economic slowdown, that can even count Germany among its victims. The ECB under Draghi has thrown everything, kitchen sink included, at the extreme challenges its faced and the President is clearly not keen to bow out with a whimper.

Draghi very much had the swagger of a man in his final weeks in a job, as he called on governments with fiscal space to do more to drive growth in the region, a clear nod to Germany which has been extremely conservative even by its own standards. Many have echoed Draghi’s sentiments here, with certain government’s far too happy to do nothing and hope the central bank can solve all their problems. It’s clearly not working.

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Trump not entirely opposed to interim trade deal

Thursday was an interesting day on the trade war front, as reports suggested that the US may be open to an interim trade deal with China that would delay new tariffs and even remove some that have already been imposed. While this was quickly and strongly denied by the White House, Trump didn’t sound too opposed to the idea.

Perhaps he’s getting a little nervous about the lack of progress and proximity to the election, not to mention the lack of support from the Fed. This could make or break his election campaign and a limited interim deal may be enough to insulate the economy and give him another four years to get more. Investors would certainly welcome it.

Gold looking vulnerable as rally quickly fades

Gold prices rose in response to the ECB stimulus package on Thursday but gains were short-lived and the yellow metal fell short of its previous peak. This leaves gold looking rather weak after such a prolonged period of strength. $1,480 is looking increasingly vulnerable and a break could trigger a sharper correction, potentially back towards the $1,400 area. Perhaps the Fed next week can pull the gold bulls back in.

Gold Daily Chart

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Oil prices slip as growth fears mount

Oil prices have been slipping in recent days even as stock markets have rallied and inventory data has reported large drawdowns. This comes as the IEA and others continue to downgrade forecasts for demand as global economic growth fears mount. The monitoring committee for OPEC+ met on Thursday but no decision on future output cuts are expected until December. The new Saudi oil minister will be keen to reduce any deficit and lift prices ahead of the Saudi Aramco listing which could make the December meeting very interesting.

Brent Daily Chart

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