Financial markets experienced another bad day yesterday as investor concerns continued to growth over global growth and a slowing of the US economy. There are some signs that cracks in the US economy are starting to show, mainly in the credit market and this is adding to all the geo-political and trade factors that are already causing concern across the markets. The US indices all finished the day over 1.5% down with the S&P in the red 2.21% and other global bourses had led the way earlier in the day. Commodities took another hard hit yesterday with Oil trading further to the downside after seeming to have consolidated over the last few days, Petro currencies experienced a sharp depreciation yesterday with Cad and Nok particularly hard hit in the majors. Comments out of the US also don’t seem to be calming the trade feud with China with a US Treasury report continuing to accuse China of intellectual theft and advising that they have taken ‘further unreasonable actions’ in recent months.
Investors were looking at the G20 meeting at the end of next week with some optimism as hope had increased that the US and China could come to some sort of an agreement on trade when the two presidents meet. However, despite comments from President Trump that he felt that a deal is possible with China this looks increasingly unlikely with the US increasing its attacks on China’s trade practices, firstly over the weekend when Vice President Pence spoke and this morning with the release of the US Treasury report. Markets have reacted as expected overnight with risk trades firmly on the back foot and there looks like there will be further downside moves once the Asian market gets up and running. The Aussie has taken a dive in the last couple of sessions, trading down over a big figure and looks set to suffer more today in it’s role as a risk proxy and expect more volatility in the EM space with the potential for moves back to the dollar possible on safe haven trades.
It’s extremely quiet on the fundamental data release front and therefore expect sentiment to continue to dominate market direction as we move through the trading day. We have to wait until the US session before we hit any tier 1 data and that comes in the form of the Core Durable Goods monthly number. Given the moves we’ve seen in Oil recently expect there to be further focus on the US Inventory numbers later in the day but overall sentiment from geo-political developments should supersede underlying fundamentals over the short term.
