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Risk-off on G20, Cable above 100-dma
The European equity markets started the week on a heavy risk-off sentiment after the G20 communiqué explicitly reflected the US intentions to establish trade protectionist measures.

The FTSE 100 opened downbeat as Cable traded above the 100-day moving average. Mining and energy stocks lead losses on softer oil and commodity prices on fears that US protectionism could negatively impact the global demand. Iron ore cheapened 0.42%, copper wrote off 0.69%.

Across the Channel, the DAX 30 (+0.10%) and the CAC 40 (-0.46%) opened under pressure as well.

The cash flows into safe heaven assets as gold and the yen.

US showed its teeth at the G20 meeting, leaving world leaders frustrated. USD sold off.

The US dollar made a soft start to the week after the Federal Reserve (Fed) delivered a ‘dovish’ rate hike at last week’s monetary policy meeting.

 In addition, the G20 meeting revived worries about the US’ trade protectionism as finance chiefs were brought to drop a reference to fight protectionism in their joint statement. Several leaders were left frustrated with the US’ position regarding the global trade under Trump administration, including China, Japan, Russia, Germany and France.

The uncertainties regarding the US’ relationship with the rest of the world weighed on equity traders’ sentiment. As the world’s number one economy is preparing to set significant barriers against the world, investors are increasingly worried.

How will the US protectionism affect the US companies’ overseas businesses and how much value would it shred from the US stocks’ value, if any? Will the US behavior be a game changer for the international trade dynamics? How fast and by how much will the world’s giant close its doors to the rest of the world? And finally, given the actual developments, how long could the US defend its position as the world’s leader?

The Dow Jones (-0.10%) and the S&P500 (-0.13%) closed on a negative note on Friday, while Asian traders stayed away from the US equity futures at this week’s open: Dow Jones futures (-0.11%), SPX futures (-0.13%) and NASDAQ futures (-0.15%) traded south.

The Dow is called 15 points lower at $20100 at the US open.

Yen, gold gain on safe heaven flows

Money flows into Japanese yen and gold.

The USDJPY traded below 112.50 for the first time in March. The MACD (Moving Average Convergence Divergence) indicator stepped in the bearish zone, suggesting that the USD sell-off against the yen is gaining momentum toward 111.60 (February support). Below 111.60, the USDJPY will face important mid-term technical levels. The Fibonacci’s 50% level on post-Trump reflation rally, 110.55, is seen as the critical support before the 110.00 psychological mark.

Limited risk appetite and softer US yields continue encouraging inflows back into gold holdings. Gold extended gains to $1235. The strengthening positive momentum suggests a recovery toward the 200-day moving average, $1262. The key weekly support is eyed at $1210/1200.

The SPDR Gold shares, the world’s biggest gold ETF, gained more than 2.5% in two consecutive sessions.

UK inflation could enhance pound appreciation

The Bank of England (BoE) hawks sent the pound above the 100-day moving average (1.2408) against the US dollar for the first time in three weeks.

Further pound appreciation is on the radar moving into Tuesday’s inflation report.

Tuesday’s data could reaffirm the rising inflationary pressures in the UK. The consensus for the headline inflation is 2.1% year-on-year in February versus 1.8% printed a month earlier. The core inflation may have climbed to 1.7% year-on-year from 1.6% a month earlier. After the MPC delivered an unexpectedly hawkish stance at last week’s monetary policy meeting, a solid inflation read could easily boost the BoE hawks, encourage a further appreciation in the pound across the board and further dent the appetite in the FTSE.

Oil rangebound despite cheaper US dollar

The WTI crude traded rangebound near its 200-day moving average, $49. Investors are undecided regarding OPEC’s plans to deal with the increase in the global oil supply.

Saudi Arabia is currently doing the heavy lifting, as the OPEC countries and Russia reduced production to support the global oil prices. The question is how long Saudi will keep the weight on its shoulders given that its own finances are significantly hit due to low oil prices since mid-2014.

Meanwhile, the US inventories stand at historical high levels, although the inventories unexpectedly retreated by 237K barrel according to last week’s EIA data. As of today, we know that the US has no will to contribute to global production cut; instead, President Trump aims to decrease the US’ oil dependency to the rest of the world. In 2015, the US imported roughly 40% of its oil from Canada and 11% from Saudi Arabia. In 2016, the EIA data printed 38% and 12% respectively. The data suggests that Mr. Trump has enough room to further squeeze the global oil markets and pressure the prices on the downside.

EUR pushes higher on Visco’s comments

 The EURUSD is looking to fight back the 1.0782 (Friday high) to reach 1.0820/1.0830 (Fibonacci 50% retracement on post-Trump decline / 2017 resistance). If surpassed, the pair could target the 200-day moving average, 1.0858 for the first time since Nov 9th, the US presidential election.

Ignazio Visco, a member of the European Central Bank’s (ECB) Governing Coucil stated that the time between the end of Quantitative Easing (QE) and rate hike could be shorter, giving the euro bulls another reason to push higher.
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