Financial market research and analysis

The Dow closed up 270 points and Asia traded on the front foot as investors reacted to the latest twist in the US – Sino trade war drama. Optimistic comments from President Trump over developments in the ongoing trade dispute helped the mood in the market turn hopeful.

Trump noted that China wanted a deal very badly and that the two had a call to get the talks back to the table. Trump’s conciliatory tone after last week’s escalation is just what the markets needed to improve risk  sentiment and push higher in such uncertain times. Riskier assets such as stocks advanced and safe havens, like the yen and gold fell.

After the escalation in tension last week, as both the US and China levied tariffs on more imported products, a sense that tensions were easing is being well received by the markets. Gold fell 1.2% across the previous session; however the fact that it is holding steady in early trade on Tuesday indicates that some level of caution still exists.

A lack of confirmation from China indicates this latest headline could just be Trump back peddling after seeing the market’s heavy falls from the previous week. Yet investors are willing to cling on to the optimism stemming from Trump’s softer tone. China’s silence and the unsubstantiated nature of Trump’s claims, could see a risk off reversal could be in store sooner rather than later.

The number of twists and turns in the trade dispute, particularly more recently have made the markets incredibly challenging to trade. Traders are so sensitive to US – Sino trade talk amid concerns over a slowing global economy, that a headline or tweet can quickly cause a significant move.

US Consumer Confidence In Focus

Today investors will be looking towards consumer confidence data for signs as to whether the trade dispute is spilling over from the manufacturing sector into the consumer sector. So far consumer confidence has remained resilient, thanks to the solid labour market. Job creation and wages are the most important factors in consumer confidence, and they remain positive. However, sentiment is expected to have declined in August to 129.5, down from 135.9. This could take the steam out of the dollar’s recent rally. The dollar index was is seen giving back some of yesterday’s gains in early trade on Tuesday.

Oil Rallies On Easing Trade Tensions

Oil rose in early trade on Tuesday on the back of Trump’s improved tone. With so many headlines to roll with, oil traders are currently focused on the prospect of a China and the US returning to the negotiating table, boosting the possibility of a trade deal being agreed. An end to the current tit for tat dispute and a trade deal between the worlds two largest economies can only be a good thing for future oil demand. However, a less expected headline could pressurise the price of oil going forward. Should Trump stick to his word and sit down with his counter part in Iran, Hassan Rouhani, there is potential for easing tensions in the Middle East, possibly sending oil $5 -$10 lower.