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Dow Below 26K Amid Growing Recession Fears

Wall Street closed sharply lower and Asia markets followed in its footsteps overnight. Political unrest in Hong Kong as protestors brought the airport to a standstill, political uncertainty in Argentina as current President Macri unexpectedly lost in the primaries, added to ongoing trade tensions, hitting sentiment.

US and European futures are pointing to a cautiously higher start on the opening bell, as investors look to claw back some of Wall Street’s deep losses from Monday. The Dow closed 1.5% lower.

Whilst the safe haven trade was crowded on Monday, flows into the Japanese yen and Swiss Franc are slowly unwinding in early trade on Tuesday. Gold, however, remains well bid as it extends gains to stay firmly over the key psychological level of $1500 and push towards fresh 6 year highs above $1520. The move higher comes despite technical indicators such as the RSI pointing to strongly overbought conditions.

Whilst data was in short supply on Monday, the economic calendar picks up today with potentially high impacting prints from UK, Germany and US. With recession fears swirling for all three of these economies, investors will be paying close attention to the data. Trading volumes are low as summer holidays are in full swing; surprises in the data could create some big swings. 

US CPI to boost gold?

The US CPI report is critical for both the Federal Reserve and the dollar. Expectations are for US inflation to hold steady at 2.1%. The Fed recently cut interest rates owing to concerns over the slowing economy amid the ongoing US – Sino trade war and thanks to concerns over inflation. A reading of 2.1% would be keep inflation above the central banks’ 2% target. However, given US recession fears, the markets could be particularly sensitive to any weakness in the reading. A surprise to the downside could see the dollar give back today’s gains and gold rally through resistance at $1520.

German ZEW sentiment survey to hit the euro?

Recent German data releases have been dismal. Industrial production at 9 year low, exports slumped 8% yoy - all point to a contraction in Q2 (see Wednesday GDP release) underscoring the struggles that the German manufacturing sector is facing. Today traders will look to German ZEW economic sentiment figures for further clues as the likelihood of a recession later this year. Lat month economic confidence fell to an 8-month low. Expectations are for sentiment to continue declining amid ongoing US – Sino trade dispute concerns. A soft reading could see the euro extend early losses and break out of its current range on the downside through $1.1167.

UK Labour report to support GBP?

Whilst unemployment is expected to remain at 3.8% wage data could offer some short-term support to the pound. Wages are forecast to increase 3.8% in the three months to June, ahead of the previous months 3.6% (the fastest pace of growth in 11 years). Labour data is a lagging data and Brexit is the key driving force for the pound. Even in the case of a strong wages reading pound strength could be short lived if Brexit news flow is favouring  no deal Brexit.


19-8-2019

Stimulus Hopes Lift Sentiment & Stocks
Quickly recapping, equities experienced their worst week so far this year, and bonds soared as investors sought safety amid an escalation of the US – Sino trade war. The US and UK yield curves inverted flashing recession alarm warning bells. As the Dow dumped … Read more

16-8-2019

Tensions ease as central bank stimulus expectations grow
Wall Street finished a volatile session broadly on positive ground overnight, with the S&P and the Dow advancing whilst the Nasdaq nudged lower. Stronger than forecast US retail sales and better than expected earnings from the likes of Walmart helped calm … Read more

15-8-2019

Carnage on Wall Street as yield curves invert
As recession warnings flashed from the bond market, Wall Street plummeted lower overnight. The Dow closed down 800 points whilst the Nasdaq and the S&P tumbled 3% and 2.9% respectively. Asian markets followed US equity indices lower. An inversion of the 2… Read more

14-8-2019

Stocks Bounce On Trump’s Tariff Delay
Asian markets joined the relief rally overnight, which saw stocks on Wall Street surge, after the Trump administration delayed tariffs on some Chinese imports until December. Good news in the markets has been a rarity over recent weeks, so reports of the delay… Read more

13-8-2019

Dow Below 26K Amid Growing Recession Fears
Wall Street closed sharply lower and Asia markets followed in its footsteps overnight. Political unrest in Hong Kong as protestors brought the airport to a standstill, political uncertainty in Argentina as current President Macri unexpectedly lost in the prima… Read more

12-8-2019

Equities Cautiously Higher Despite Ongoing Trade Pessimism
With part of Asia closed for public holiday, those Asian markets remaining open nudged higher overnight. Meanwhile, European and US futures are pointing to a stronger start on Monday, despite uncertainty surrounding the next steps in the US – Sino trade disput… Read more

9-8-2019

Italy early vote risks weigh on euro
Escalating trade war is all the US got from imposing a 10% tariff on additional $300 billion worth of Chinese imports, from calling China a currency manipulator and most recently from holding off on giving licenses to companies wishing to do business with Chin… Read more

8-8-2019

Odds up for larger Fed, ECB rate cuts
It has been a wild week for the global markets, as the dovish central bank expectations went through the ceiling following the escalating trade tensions between the US and China. The Reserve Bank of New Zealand opted for a surprise 50-basis-point cut (vs 25bp … Read more