Stock markets experienced a brighter day yesterday as trade concerns eased slightly. Asian markets had a tough day but European and American bourses found a base and managed to claw back some of their recent losses. The major US markets finished nicely in the black with the Nasdaq once again leading the charge, up 1.14% followed by the S&P and Dow, both closing around 0.8% to the good. The dollar moved higher as the day progresses with the Dxy back up around 97.50 on the Asian open. Haven currencies receded with UsdJpy bouncing well off of support at 109.00, UsdChf having a similar reaction off the 1.0050 level and Gold dropping off resistance near 1300. Oil remained relatively stable over the day with the WTI back at $61.3/b and Brent trading near $71.25/b.
There are some signs of a lowering of tensions in the trade war as language has softened somewhat from last week and it appears that negotiations will continue at some point. However the facts remain the same, we have seen substantial tariff increases from both sides and the US has confirmed that it is preparing tariffs on the remaining $300bio of Chinese imports. This is universally acknowledged as a huge risk for both countries growth expectations as well as the wider global environment and investors should be preparing for even lower forecasts as we progress through the year. Only time will tell whether this is the perfect time to go bargain hunting in the stock markets or whether markets are just having a breather before they continue to spiral lower as expectations and sentiment fall.
Investors will continue to monitor key barometer currency pairs in the sessions ahead with the Yuan, Aussie, Swiss, Yen and Yen crosses all having the potential for more volatility. Despite some recovery for the UsdJpy and Jpy crosses overnight, the Aussie and Yuan remain under pressure near recent lows and traders will be looking for more confirmation of a cooling in the trade war before looking to enter int fresh long positions.
Looking ahead at todays trading day and Aussie traders will be focusing on the latest Wage data due out this morning, expectation is for a print of +0.6% and given the RBA’s recent updates, anything coming out substantially lower could lead to another step lower for the currency with 0.6900 the next target. We are also due to see Chinese Industrial Production numbers later in the day, yoy expectation is for a 6.5% rise. It’s relatively quiet in the European session although investors will monitor the latest Euro flash GDP number. The New York day has some key data due out with the US Retail Sales numbers due at the same time as the Canadian CPI, we’re also set to hear from FOMC member Quarles later in the day.