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Trade Fears offset Rate Cut Optimism

Asian markets traded mixed overnight as optimism over  more supportive central banks was offset by ongoing concerns over trade. Trump poured cold water on any hope that the US and Mexico were close to a deal, hitting already fragile sentiment. If no deal is reached tariffs at 5% will begin on Monday and judging by Trump’s comments that is looking more likely than not.

Mexican markets were dealt an additional blow after rating agency Fitch downgraded the country’s debt rating to BBB, whist Moody’s cut its to negative from stable. The Mexican peso dropped 0.9% versus the dollar as investors responded to the downgrades.

Wall Street managed another positive close as investors focus on the possibility of the Fed cutting interest rates to support the US economy in the event of a downturn, amid a drawn-out trade war. Whilst weak ADP private payroll numbers supported the case for a rate hike and was cheered by investors, stronger than forecast ISM non-manufacturing data had the reverse affect. Friday’s non-farm payrolls will provide markets with a clearer picture as to the health of the US economy and the chances of rate cut in the near term.

Oil holds on to losses

Having plummeted 3.5% in the previous session, oil was holding onto those losses in early trade on Thursday as it hovered around a five-month low of $51.80. The sharp fall came following an unexpected jump is US inventories amid escalating concerns over future demand. Supply is swelling just as fears of a global downturn are hitting the future demand side of the equation. This timing couldn’t be worse. Brent dipped below $60 per barrel, whilst WTI has managed to hold above $50. Any further signs of the global economy weakening, and these key levels could quickly be breached.

All eyes on the ECB

After the RBA cut rates and the Fed signalled a dovish shift, all eyes are on the ECB and what their next move is likely to entail. The euro pushed higher versus the dollar in the early part of the week, following a more dovish Jerome Powell. However, the euro has pared some of those gains as we move towards the ECB announcement.

Despite some improvements to eurozone data, the most important data points for the ECB, namely, consumer spending, manufacturing, retail sales, and inflation have been moving lower. External factors such as the US – Sino trade dispute and Brexit are also acting as a drag on the eurozone economy. Draghi & Co could struggle to stay positive. Given the low inflation and trade uncertainty we expect the ECB to trim their macro-economic projections and  modify their interest rate forward guidance. As for the TLTRO3, the devil is in the detail, investors will use this to make judgement as to how dovish the ECB are right now.

25-6-2019

Iran tensions boost risk-off trades
Nothing much happened on Monday, except from the US imposing further sanctions on Iran, including the country’s supreme leader Ayatollah in what is seen as a ‘symbolic’ and even a ‘provocative’ action.So, in one hand, we have the developing Iran story that mov… Read more

24-6-2019

Oil gains, stocks mixed on Iran tensions
The week begins with a limited risk appetite, as tensions between the US and Iran escalate. The US prepares to impose more tensions on Iran today.Oil extended gains in Asia; Brent crude trades near $65 a barrel, as WTI is preparing to test the 100-day moving a… Read more

21-6-2019

GBP rebounds, S&P500 hits all-time high
The S&P500 advanced to a fresh all-time high on Thursday, as the dovish Federal Reserve expectations fueled the equity purchases around the globe this week. Slack made a solid debut in New York Stock Exchange. The price surged to $42 per share, well above … Read more

20-6-2019

BoJ, BoE to stay pat, Slack goes public
Equities extended rally as the Federal Reserve (Fed) delivered a sufficiently dovish accompanying statement not only to meet the market’s expectation, but also to surprise to some extent. The Fed maintained its benchmark rate unchanged at 2.25%-2.50%, kept its… Read more

19-6-2019

Stocks rally on dovish ECB, Fed in focus
The European Central Bank (ECB) President Mario Draghi’s speech was a godsend for the European bond and stock markets on Tuesday. The Eurostoxx 50 and the Dax closed the session 2% stronger, the CAC rose 2.20%, as the euro got shattered across the board.The EU… Read more

18-6-2019

Markets calm pre-Fed, EUR CPI in focus
Investors in equity and foreign exchange markets are reluctant to take a direction before this week’s much expected Federal Reserve (Fed) decision. The S&P500 (+0.09%) and the Dow (+0.09%) closed flat on Monday. NASDAQ gained 0.62%, as technology stocks ra… Read more

18-6-2019

Facebook cryptocurrency Libra validates bitcoin
Libra will expose 2 billion Facebook users to crypto Stablecoins like Libra don’t compete with Bitcoin Bitcoin back in a bull market Today Facebook is set to release a whitepaper about its new cryptocurrency dubbed Libra. Libra could mark the beginning … Read more

17-6-2019

Stocks better bid; Fed and BoE in focus
The trading week started with a mixed risk appetite in Asia. The Hang Seng index gained up to 1.25% after Hong Kong’s chief executive Carrie Lam delayed the fiercely disputed extradition law on Saturday. Still, millions gathered in Hong Kong on Sunday asking f… Read more