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Gold gains may not last as Fed restarts asset purchases

European shares have steadied, making modest gains on Wednesday morning with US futures pointing to another dip at the open.

Now just waiting for trade Talks

This week’s US-China trade talks now look over before they’ve even began so markets are re-pricing the chance of progress. Now it is understood that positions have hardened on either side so investors have dimmed the selling while they wait for the talks to begin.

Merkel crushes any lingering Brexit deal hopes

The pound is down but no out following the latest Brexit twist. In the space of a month, German Chancellor Angela Merkel has gone full circle from the beacon of hope to the bearer of bad news on Brexit. A war of words between Downing Street sources and EU officials has seen a souring of the mood. There is a glimmer of hope from a scheduled meeting between the British and Irish Prime Ministers this week, but we like most, think a deal at this stage is lost. The fall in Sterling in our view is not so much disappointment that a (never very likely) deal will now not get though. This new stand-off means a higher chance that Boris is forced to run an election campaign on No Deal.

As we noted yesterday, legal texts saying the PM will extend on October 19 limits the downside for Sterling. Boris sneaking a No Deal through a legal loophole / backdoor wouldn’t be a good look for any forthcoming election, so we don’t see it as a likely proposition. For now our base case is a “reluctant extension” and a modest recovery in Sterling.

GVC shares looks good after OTC pickup

Shares of GVC rose over 2% after the betting firm raised its full-year guidance in its latest update. The stake-limit has killed off the Fixed Odds Betting terminals business so its welcome to see other areas of the business taking some of the slack. Online gaming has been a steady source of growth for GVC so the positive surprise was the pickup in the OTC (over-the-counter) business. Gains were capped by a warning from the company about the regulatory uncertainty in Germany. We view the regulatory interventions in the UK and Germany as an opportunity to position for the long-term potential growth from US sports betting at a lower valuation.

Gold gains may not last as Fed restarts asset purchases

Some are taking a positive view that the Fed re-starting asset purchases is the first step towards QE and that should be good for gold. Indeed gold prices are higher since the announcement. We are a little more glass half-empty on the yellow metal short term. We take the Fed at their word on this, that the resumption of asset purchases is to fix issues in the repo market, nothing else. If this is not an under-the-table-QE, then it is more evidence of reluctance from the Fed to acknowledge they have begun a full-blown easing cycle. The gains in gold were probably more a reaction to Fed Chair Powell making a robust signal that another rate cut is coming October, which does slightly improve the allure of non-interest-bearing assets. Our expectations are for another drop through $1485 per oz, though this view will need re-evaluation if gold rise above $1535.


Is Brexit happening? The ball is in Parliament’s court. P&G to top estimates.
Stock markets trade on a positive note on growing expectations that the US and China may finally clinch a partial deal at next month’s APEC meeting in Chile. US President Donald Trump said that China is already buying US farm products, and he wants them to buy… Read more


Pound slips as UK leaves BoJo’s deal aside and votes to delay Brexit
The pound fell to 1.2875 against the US dollar, as British lawmakers voted to ask for a delay on the Brexit deadline on Saturday rather than voting on the Brexit deal that Boris Johnson put on the table.As a result, a letter was sent to EU’s Donald Tusk asking… Read more


China slows. Pound gains as Parliament prepares to vote on Johnson’s deal
The Chinese GDP growth fell to 6% in the third quarter of 2019, although the industrial production jumped to 5.8% y-o-y in September and the retail sales advanced 7.8% as expected, versus 7.5% printed a month earlier. Fixed assets excluding the rural area expa… Read more


Pound traders hedging downside risks, again. PM’s alternative businesses at jeopardy.
If the week started on some optimism regarding the US-China trade deal and the Brexit, it will probably end on battered hopes of seeing any progress on both ends.The S&P500 (-0.20%), the Dow Jones (-0.08%) and Nasdaq (-0.30%) closed Thursday’s session in t… Read more


US-China deal hopes are being dashed, again. Netflix in focus.
US stock markets closed in the green on better-than-expected bank earnings on Tuesday.But the US stock futures headed south in the overnight trading session, as tensions with China started rising again amid the US House passed a bill on Hong Kong, which requir… Read more


US bill risks China retaliation
Shares in Europe slipped, and US futures are pointing lower on Wednesday. There’s some fear out there that China will retaliate to a US bill defending the rights of Hong Kong protestors. The timing is certainly awkward, just as the US and China struck a “phase… Read more


China wants more talks. Euro gains ahead of a potentially ugly ZEW survey.
Chinese officials threw cold water on the optimism about Donald Trump’s first phase trade agreement, as they said to be willing to discuss more before signing a deal. We could already feel that the Chinese were not fully satisfied with their Washington visit, … Read more


Equities edge moderately higher, no feeling of euphoria after US-China partial agreement
Equities began the week on a positive note amid the US and Chinese officials reached a partial trade agreement at last week’s negotiations.The S&P500 (+1.09%), the Dow Jones (+1.21%) and Nasdaq (+1.34%) gained on Friday, although Donald Trump’s announcemen… Read more