Financial market research and analysis

US equity futures kicked off the week on a negative note on fears that this week’s high-level trade talks between the US and China wouldn’t lead to a satisfactory outcome, after Chinese officials announced having narrowed the range of topics that they are willing to discuss on.

Discussions, which will begin on Thursday, will likely keep investors on their nerves and limit the risk appetite.

Mixed US jobs data, on the other hand, spurred the expectations that the Federal Reserve (Fed) could lower its rates by another 25 basis points by the end of this month.

The US economy added 136’000 new nonfarm jobs in September, versus 145’000 penciled in by analysts. The average earnings stalled. Although last month’s figure was revised up to 168’000 from 130’000 and the unemployment rate fell to 3.5%, a fresh fifty-year low, investors remain skeptical about the health of the US jobs market, with thousands of job cuts expected in the coming months from big names such as HP.

But Kansas City Fed President Esther George, who is among the most hawkish Fed members, said there is no need to cut the rates further, as the US economy is doing well and missing the 2% inflation target over the past decade hasn’t been a concern.

Still, treasury yields tanked, and the yield curved steepened, as the probability of a 25-basis-point cut jumped past 80%. The US 10-year yield fell to 1.50% for the first time in a month.

WTI crude opened the week quietly around the $52 a barrel. With the supply-side shock being fully digested following the Aramco drone attacks, trading on oil markets will likely be demand-oriented. Hence, a further slide toward the $50 level is just a matter of time provided the fading optimism regarding the US-China trade negotiations, low PMI numbers across the globe and the slowing economic activity.

Japanese equities fell on Monday, as the USDJPY slipped to 106.57 on safe-haven demand.

Swiss franc gained and gold opened a touch above the $1510 an ounce. The risk-off environment and low sovereign yields could encourage further capital flows into the precious metal and push the price of an ounce toward the $1520-resistance for the second straight week.

Elsewhere, Hong Kong suffered the most violent anti-China protests during this weekend. Shops closed, trains stopped operating. HK government banned face masks in an attempt to cool down the tensions. Businesses in Hong Kong have perhaps endured the biggest opportunity cost since the beginning of the protests, as tourist arrivals from mainland China dived 86% during the most prosperous Golden Week holidays.

Chinese and Hong Kong markets will resume their activity tomorrow. Hong Kong protests and waning hope regarding a US-China trade deal could weigh on stock prices and further dampen the global market mood.

FTSE futures (-0.14%) hint at a soft start in London, though the relatively cheap British pound should ease the selling pressure as the index approaches the 7000p mark.

The pound can only remain under the pressure of Brexit uncertainties, as PM Boris Johnson jibs at demanding a delay to European leaders beyond the October 31st deadline. Johnson insists that the UK should leave the European Union by October 31st, even if it means a no-deal Brexit, but he has no mandate to do so. According to the latest news, he will be seeking legal action at the Supreme Court to avoid sending a letter to his EU counterparts asking for a delay. Although a delay is what appears to be the most plausible scenario for the moment, there is a rising anxiety that Johnson could find a way to avoid extending the Brexit deadline and crash the country of the European Union too early, and unprepared.

Cable dived below the 1.23 mark in the early trading. The pair will remain in the bearish consolidation zone below the 1.2350, major 38.2% Fibonacci retracement.