Stock markets across the globe have been treated without mercy this week as fears over prolonged US-China trade tensions weighed on market sentiment over global economic growth and stability.
The gut-wrenching selloff witnessed this month suggests that markets are adapting to the reality that US-China trade tensions are here to stay, especially following both sides ramping up their rhetoric on trade tensions throughout. It is becoming evident that global equity markets are facing the perfect storm of headwinds in the form of persistent US-China trade drama, concerns over plateauing global growth and tumbling commodity prices. For as long as these themes remain in play, investor appetite for stocks is poised to evaporate – ultimately bringing equity bears back into the game.
Asian stocks flashed red on Friday morning. This followed a painful session on Wall Street overnight. European shares are at threat of trading lower this morning and will likely be further at risk to volatility depending on the newsflow coming outof the European elections.
Dollar not so mighty after US data disappoints
Investors who were looking for an appropriate opportunity to attack the Dollar were given the thumbs up yesterday after official reports showed that the IHS Markit US manufacturing PMI hit a 9-year low this month.
Rising concerns over the prolonged US-China trade disputes negatively impacting the US economy are at threat of playing a leading role in the sudden USD selloff. Markets still expecting the Federal Reserve to cut US interest rates later this year, highlighting that the unexpected Dollar upside in 2019 risks running on borrowed time.
While the perception that the US remains in a far better condition than everyone else could continue supporting the Greenback, and a sudden spell of bad data would threaten this sentiment falling over like a house of cards.
Oil crumbles on surging US stockpiles; trade tensions weigh
There are few doubts that yesterday should unofficially be declared as the seller’s market for Oil prices after the commodity tumbled more than 5%, the steepest drop for Oil in 2019.
The dangerous combination of surging US crude inventories, weak demand from refineries and rising concerns over US-China trade tensions impacting economic health is creating a recipe for disaster in Oil markets.
It must be kept in mind that concerns over supply shocks following the resumption of economic sanctions on Iran could only push Oil prices to a certain level and this has been baked into the market months ago.
Commodity spotlight – Gold
Gold flickered back to life yesterday as ongoing US-China trade tensions and Brexit drama accelerated the flight to safety. A depreciating Dollar supported upside gains with prices punching back above the stubborn $1280 resistance level. With speculation in the air of the Fed cutting interest rates this year and persistent concerns over slowing global growth weighing on risk sentiment, Gold’s medium to longer-term outlook remains tilted to the upside.
Taking a look at the technical picture, bulls seem to be back in the driving seat after prices pushed back above $1280. The daily close above this point is likely to signal a move higher towards $1300.