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Risk settled in the previous session as a lull in the China-US trade spat enabled traders to shift their attention to other events, including the appearance of key central bankers in Sintra. The rather undeserved calm across the overnight session saw the S&P close 0.1% higher, whilst the FAANG’s led the Nasdaq to a new record high. In contrast, the Dow, gapped higher on the open for the first session in four, before dropping to close lower for the 7th straight session, its worst run since early 2017.
The lack of fresh threats from Trump’s administration has been enough to see a rapid easing in risk aversion, however, the reality is that fundamentals remain under pressure. Furthermore, we have been reminded that this is not just a US – Sino war, with the European Union announcing $2.8 billion worth of trade tariffs in response to US levies announced on metals back in May. Yet even with China and Europe retaliating the markets are happy to continue pushing higher; Asian gaining ground overnight and Europe in line for another positive start.
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Crude Higher as OPEC Meeting Comes into View
Crude will remain under the spotlight as we approach the OPEC meeting from Friday. With IEA claiming the oil glut which sent prices plunging in 2015/16 has now been resolved and the fact that OPEC is producing less than its self-imposed restriction, it’s hardly surprising that some OPEC members believe oil will be vulnerable to prices moving higher. Whilst Saudi Arabia and Russia are two key players strongly in favour of increasing output, Iran has been a noisy protestor.
The market appears to be expecting a gradual rise from OPEC and Russia, meaning should no agreement be reached then oil will surge higher.
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