US Open – Trump/Nato, Oil steady, Gold higher, Bitcoin remains vulnerable

US stocks are poised for a lower open after President Trump reminded markets of a laundry list of issues that dented the prospects of a short-term rebound in global economic growth.  Risk aversion took the dollar off session lows and sank 10-year Treasury yield back below 1.80% after Trump’s over 45-minute meeting with the head of NATO in London. 

Today’s risk-off tone occurred after President Donald Trump said he has no deadline for a trade deal with China and after tough talk on the EU suggests the transatlantic trade war is about the enter an ugly phase.  While US stocks are looking for at potentially third consecutive down day, the selloff is somewhat limited as Trump’s rhetoric does not dissuade the argument that he will not move forward on the December 15th tariff deadline as that will mainly punish the US consumer. 

European assets still remain inexpensive, but an export dependent economy will see car manufacturers struggle as the tit-for-tat transatlantic trade war begins. 

Despite optimism that we will not see a trade tariff escalation around the holidays, the US-China trade war is heating up as China appears close to releasing blacklist that will impose sanctions on some US companies.  The list of “unreliable entities” is a counter-measure to US bill that looks to put sanctions on Chinese officials for the alleged abuses of Uighur Muslims in the far west region of Xinjiang.  The risk of a complete collapse in US-China trade talks is very small, but it is growing. 

Oil

Oil prices appear to stuck in limbo ahead of the OPEC + meeting that is widely expected to see the production cuts extended a few more months.  While the oil producing cartel is likely to extend production cuts, the lack of Russian compliance will likely be a key focal point.  Energy traders are unlikely to see oil prices break above its recent trading range unless we see OPEC and its allies deliver deeper production cuts.  Talks of deeper cuts pretty much fell off the radar in November, but we should not be surprised if the Saudis lead the charge for higher oil prices.  Too much is at stake for the Saudis with their Aramco IPO just around the corner.  Brent crude could easily top $65 a barrel by the end of the week, but we should not see a major bull market as rising production Norway and Brazil will mitigate any deeper production cuts that could possibly come out of the meeting. 

Gold

Gold prices are edging higher following President Trump’s downbeat comments on trade.  Trump said he might wait up to a year to complete a trade deal with China and seemed to setup a tit-for-tat escalation with the transatlantic trade war.  Gold is once again approaching the upper boundaries of its 4-week trading range as investors are not buying that we will not see the US move forward with the December 15th tariff increase.  Trump will not want to punish the US consumer and risk becoming the Grinch.  Gold prices could continue to climb in the short-term but will struggle to recapture the $1,500 an ounce level. 

Bitcoin

Bitcoin’s rebound from last week is slowly being faded as uncertainty remains on whether it will survive the harsh regulatory environment from both the Chinese and Americans.  Following a precipitous fall early last week, Bitcoin rallied on optimism German banks will soon be allowed to sell cryptocurrencies.  Bitcoin will need a lot more countries adopt a friendlier approach to digital assets before we see a massive inflow of buyers return.  If $6,500 breaks in the short-term, it could get very ugly Bitcoin. 

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