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Steel Tariffs & Wall Street drops, Christine Lagarde & EURUSD holding 1.10

Shares in Europe are on course for a positive start with LCG pricing indicating a higher open on Wall Street. The dollar is up slightly after falling yesterday. Gold remains in a tight range while oil is rising for a second day.

Wall Street drops after steel tariffs announced

Shares slumped on Monday in the biggest daily fall since Wall Street struck record highs last month. The US placing steel and aluminium tariffs on Argentina and Brazil caught markets off guard. Traders have had US-China trade tunnel vision. As Americans would say, this came out of left field. The new tariffs in South America are a reminder that with Trump as US President, a phase one trade deal with China doesn’t mean global trade just resets to the old status quo. Traders are buying the dip on Tuesday but there is a risk that markets have been placing too much emphasis on the trade deal, at the expense of ignoring other risks. The growing reticence from central banks, like the RBA overnight, to expand monetary stimulus is being ignored while the trade war takes centre stage.

Euro rebounds from 1.10 level again

A broad decline in the dollar after soft manufacturing data has pushed the euro to 2-week highs. A fourth monthly decline in US manufacturing was particularly disappointing in the wake of more upbeat data in China and parts of Europe. The rally in the euro yesterday was notable from a price action standpoint. It is the third time the 1.10 price handle has held off declines in EURUSD since breaking above it in early October. It’s a further indication that the euro is bottoming out after hitting 2-year lows in September this year.

New ECB President Christine Lagarde might be some of the reason the euro strengthened more than other currencies against the dollar. Traders are reading the tea leaves scattered by Lagarde in her first speech to the European parliament. Lagarde said she would be resolute on the ECB inflation mandate, seemingly indicating no plans to reduce the target rate from just under 2% to 1%. That’s dovish because the ECB isn’t meeting the target, and arguably needs more stimulus to reach it. On the other hand, the acknowledgement of the side-effects from the ECB’s ultra-accommodative policy is a notable shift from her predecessor Mario Draghi – who always minimised the negative effect on banks specifically.

21-9-2020

Trump approves TikTok deal, Powell & Superdry earnings
MARKETS The Dow Jones fell on Friday as investors had to contend with another selloff in big tech, led by Google. Friday moves came as four major types of options contracts were set to expire in a quadruple witching, triggering a rise in volatility. European e… Read more

18-9-2020

USD/JPY sub-105 and UK retail sales
MARKETS US stocks fell in volatile trading on Thursday amid renewed pressure in shares of major tech companies. Conflicting messaging on the coronavirus vaccine front and uncertainty around further stimulus also weighed on sentiment. European equities fell aro… Read more

16-9-2020

Buffett-backed Snowflake IPO & Fed Preview
MARKETS The Dow Jones ended roughly flat on Tuesday, pressured by a fall in financials and a u-turn in Apple after the tech giant launched a new services bundle and hardware. The S&P 500 was up 0.52% while the Nasdaq added 1.21%. Apple rose 0.2% but had be… Read more

14-9-2020

Brexit bill first debate & tech stock sell-off
Markets The major U.S stock indexes fell for the second week in a row, as technology stocks experienced their worst pullback since March. The market was volatile in a holiday-shortened week, with the Nasdaq posting a 4% decline on Tuesday followed by a nearly… Read more

18-5-2020

Gold hits 7-year high after Powell Warning
Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu s… Read more

14-5-2020

Powell predicts more pain to come but no NIRP
A warning from the top of the US central bank that there’s more pain to come isn’t going down well across markets. Fed Chair Jerome Powell warned yesterday that more stimulus will likely be needed in the US to fend off the economic damage done by virus and pol… Read more

13-5-2020

“Suffering and death” warning hurts markets
A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves… Read more

12-5-2020

Bitcoin halving, dollar breakout on second wave fears
Market sentiment remains fragile. There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening.  Wuhan, the City in China where it all began reported its first ‘cluster’ of new cases yesterday after lifting restri… Read more