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US stocks markets gapped higher on the open, yet the positivity quickly evaporated, and US stocks moved steadily lower across the session. Not even a flurry of M&A activity was enough to keep Wall Street afloat as investors continued to fret over higher inflation expectations and a more aggressive Fed.
Steel & Aluminium tariff deadline extended
Trump deciding to extend the deadline for his steel and aluminium tariffs helped lift Australian shares to a 7-week high overnight. This is encouraging news and supports the notion that the tariffs are just a negotiating stance by Trump, who in fact has no intention of implementing them. That said, there is still plenty of uncertainty over the US – China trading relations and the US - Iran nuclear deal to keep investors on edge.
Many markets across the globe are closed for Labour Day so trading is expected to be a trickle out of the blocks rather than anything more high impacting. Commodities are expected to remain in focus with oil prices hovering around 3 ½ year highs as Trump threatens to pull out of the international nuclear deal with Iran, unless it is renegotiated by 12th May. Brent hit an overnight high of $74.84 per barrel, not far from last month’s peak of $75.47 per barrel, the highest level since 2014.
Gold at 6 week low
Whilst energy is trading higher, elsewhere commodities are a mixed bag, with metals mainly in the red. Gold was a standout loser, dropping to a six-week low of $1311, trading at the lower of end the range for 2018 as the stronger dollar continues to grind prices lower.
Apple to report
The earnings reports from Apple later is set to attract significant market attention, particularly given the expectations for sluggish iPhone X sales at the world’s largest company by market cap. Earning season so far has produced some solid results, even the market leaders, the FAANGS (Facebook, Amazon, Apple, Netflix and Google parent Alphabet) of those that have reported, they have updated with robust numbers for both top and bottom lines. Yet instead of the solid earnings season giving bulls fresh reason to take the markets higher, the US equity indices haven’t benefited from such optimism.
What is clear is that the markets no longer assume that solid Apple results are the given that they once were. Investors have been on edge that Apple might not live up to expectations. As long as Apple doesn’t give a downbeat guidance, the market should be able to take what Apple throws out. Given the negative bias to the markets, a downbeat guidance from Apple could prove too much.