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Asian markets traded in a risk-off environment after the US naval drone rose tensions between US and China. The incident further revived concerns regarding the future relationship between the two powerhouses. Chinese policymakers made an official announcement in an effort to avoid a bigger drama. Political risks involving the US and China prevail, given that any occurrence is now amplified by the succession of politically unpleasant events since Donald Trump has been appointed as the next US President on November 9th.
While stock investors preferred to stay still through the Asian trading session, the rise in oil prices has been the major driver of divergence between the stocks.
Nikkei, Topix, Hang Seng and Shanghai’s Composite saw little demand, while Australia’s ASX 200 (+0.53%) diverged positively due to a solid performance from its energy sector. Australian energy stocks (+0.79%) led the ASX higher, as the barrel of WTI (+0.81%) consolidated above $52/barrel.
In a similar way, the recovery in oil has been a major motivation for buying the FTSE futures, rather than other European futures.
As such, the FTSE futures (+0.52%) left its European peers behind through the Asian trading session.
Oil rebounded on the back of news that Libyan oil-facility guards did not allow the supply from the country’s two biggest oil fields, known as EI Feel and Sharara. The price of oil recovered above the critical technical level of $52.75 (minor 23.6% retracement on OPEC agreement rally), bringing up the possibility of a re-test of $55 level. Solid offers are sheltered on the way north. Supply-backed upticks in oil prices still represent interesting top selling opportunities.
The FTSE gapped slightly higher at the open, yet failed to consolidate gains above 7013 pence. Mining stocks (-0.25%) and industrials (-0.35%) are leading losses, while financials (-0.07%) remain flat at the open.
Royal Dutch Shell (+0.23%) and BP (+0.67%) are slightly bid, yet investors appear to lack conviction on the current positive attempt in oil markets.
Barclays (-1.80%) is offered on news that the bank will urge 7000 clients to trade more, or find another bank. Investors are pricing in the possibility of losing clients with a high potential by setting them off the game in such an unfriendly manner.
Barclay’s client unboarding should benefit other British and foreign banks implemented in the UK and British local banks.
US stocks called higher at the open
The Dow Jones had a flat Friday session (Friday close 19843.41), as financials gave back 0.84%. Technology stocks lost 0.50%. The S&P 500 stocks closed the week 0.18% lower (Friday close 2258.07). Some stock traders preferred taking their gains before the weekend.
The Dow (+0.22%) and the S&P (+0.08%) futures remained marginally bid in Asia, despite limited risk appetite.
US stocks are called higher at the US open. The Dow Jones is expected to open 39 points higher. The S&P 500 is seen 4 points firmer.
As we enter the Christmas, year-end holiday period, volumes could decline and lead to choppy price action. Traders should watch out for higher volatility due to restricted holiday trading volumes.