US equities are likely to struggle recapturing record high territory until we have a clearer picture of both the ECB and Fed easing cycles and if we only see China become more focus on lessening the impact of the trade war than looking to resolve it. China began tariff exemptions today but decided to keep life hard on US farmers. China is trying to offer an olive branch here, but in no way is showing any signs they are abandoning their retaliation strategy as US is preparing their next tranche of punitive measures at the start of next month.

Markets remain fixated on whether we will see the ECB cut rates and announce a 30 or 45 billion euros a month of asset purchases for a year. This is the first domino that needs to fall in the bull market argument for many. If the ECB delivers, we could see safe-haven currencies take a hit, but a major move might not happen until the Fed has their meeting next week. ECB’s Draghi has been very clear in signaling stimulus was coming, but markets remain fixated on whether the Fed’s Powell will capitulate.


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Oil is stronger on some trade impact optimism and after another several million-barrel drawdown was reported by the American Petroleum Institute. On Monday, energy prices took a hit after President Trump dismissed his John Bolton, his national security adviser. Bolton is a hardliner and his departure could pave the way for a softer stance with Iran and Venezuela. If Iran and Venezuelan production starts to comeback, we could see limited gains on any de-escalations delivered in the US-China trade war.

Crude prices are off the session highs after OPEC’s monthly report reminded us global demand continues to fall and after output rose in August. The rise in production was mainly led by the Saudis.

In the short-term, West Texas Intermediate crude is likely to remain stuck in a range between $52 and $60 a barrel.


It appears gold’s pullback could be finishing up as price tries to hang onto the $1,500 an ounce level. Some recent trade optimism and split views on what the ECB will do has kept gold stuck in no-man’s land. While we could see a delay in the ECB’s QE launch, that could provide one last downward push before we saw buyers fully re-emerge. Medium-term outlook still calls for higher gold prices as central bank buying remains strong and the Fed appears to be locked into an easing cycle, despite their hesitation to say so.


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