US Open – Stocks focus on China purchases and not protests, Oil rises as Russia open to 1-month cut extension, Gold steady, Bitcoin pops past $10K

US equities advanced higher after Chinese firms continued to purchase US soybeans, alleviating concerns that China was halting US agricultural imports.  Stock optimism is not going away as pandemic concerns ease and that the national crisis that includes looting, fires and violence is expected to be temporary.

Protests

Cities across the US continue to have both peaceful protests and widespread disturbances.  The equity market is totally removed as curfews are not enough to keep the peace with protests.

Adding to a tense situation was President Trump threat of military action if officials can’t contain protest violence. The Insurrection Act is a cooperative agreement that can be invoked by President Trump if governor’s request support.  The President can immobilize the military in DC, because it is a federal city, but not in any other state of the union.

Risk appetite however will start to show signs of fatigue if famous neighborhoods in important cities in the US continued to be ransacked and vandalized.

RBA

The Australian dollar is surging after the RBA interest rate decision went as planned and as iron ore prices advance on improving Chinese demand.  Aussie dollar will continue to ride economic optimism rally as the economic recovery takes hold.  Monetary policy decisions should be boring going forward with the RBA as they will maintain accommodation to support jobs, incomes, and businesses.  The three-year government bond yield is practically set at 0.25% suggesting the low interest rate environment is here to stay until progress is made with achieving full employment and inflation returns to the 2-3% target band.

The Australian dollar is starting to look very bullish as the economy looks like they are winning the battle against the coronavirus and confidence is high the reopening momentum will continue.

Oil

Brent crude came close to the $40 level after Russia and several other OPEC + members signaled a preference for a 1-month extension of production cuts.  Energy markets were not entirely confident that Russia would play ball for another month, so oil prices had a little room to climb higher.

The oil market seems to be following the stock market optimism that for now has been unbreakable despite a looming China risk and rising social unrest in the US.  The global economic recovery has done wonders for an improving crude demand outlook but sooner than later, escalating trade tensions, curfews across the nation, and permanent labor destruction will dampen the outlook.

WTI crude is facing huge resistance from the gap that stemmed from the Saudi-Russian price war.  Back in March, the worst price plunge since the Gulf War saw oil prices plunge over 30% below the $40 a barrel level.  In order for WTI to break out higher, the oil market will need to find balance, or the demand outlook needs to find some major breakthroughs in finding a treatment/vaccine for COVID-19 and for China and the US to play nice.

Gold

Gold prices are starting to look very again as the dollar softens and as investors continue to build upon short bets for US stocks.  The fundamentals are screaming for safe-haven flows as it seems unlikely that the world’s two largest economies will patch up things up anytime soon.  As protests spread nationwide a trail of destruction across many American cities will also complicating an already soft economic recovery.  US reopening momentum just got dealt a major blow that will likely bring forward fiscal and monetary stimulus efforts.

Gold looks poised for another run towards $1800 as the fundamentals have turned negative for the world’s two largest economies, a weaker US economic recovery, and prospects for more stimulus.

Bitcoin

Bitcoin burst past $10,000 as skepticism for the US stock market rally saw many investors bite the bullet and add cryptocurrencies to their portfolios.  Bitcoin’s surge did not have a specific trigger but growing institutional interest has been the backbone to this rally.  This rally above $10,000 feels different and could mark a major turning point for Bitcoin.

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