It’s (Not) Over

Stock markets are pushing higher on Tuesday, following some wild fluctuations overnight as remarks regarding the US/China trade deal were taken “wildly out of context”.

With relations between Washington and Beijing seemingly in tatters, concerns are understandably growing around the hard-fought phase one trade deal. So when White House trade advisor Peter Navarro said the trade deal was over, it triggered a bit of panic in out of hours trading.

Navarro later claimed the comments were taken out of context, while Trump took to Twitter to reassure everyone that it remains fully in tact. That was enough for markets to reverse earlier declines but it’s not going to put an end to the speculation.

With Trump fighting election this year and determined to deflect all blame for the coronavirus Beijing’s way, relations between the two are unlikely to improve and the trade deal could collapse. If Beijing really does want to see Trump removed from office, it may not even be the White House that pulls the plug. It could be an intense few months.

Thankfully there’s a lot of stimulus sloshing through the system so not only was the impact short-lived, the rebound has been pretty tasty. Europe is up around 2% today, lifted further by the encouraging PMI readings this morning. The UK and France even saw a return to growth territory which is promising.

Oil closing early March gap

Oil prices are recovering from the overnight setback, with WTI jumping back above $40 and looking in a seemingly good position to add to those gains. We’re almost back at early March levels, which is quite remarkable under the circumstances. It’s been a rollercoaster ride but the early March gap lower is almost filled. We may see it run into some resistance around the $42 mark, once that happens, with $40 then being the first test of support below.

Gold rally briefly cut short

The dollar briefly came back into favour overnight following Navarro’s comments on the trade deal. This is often the case when the trade deal is under threat and overnight was no exception. But as the retractions started pouring out, the greenback quickly reversed course and so did gold, which saw it’s rally cut short by the news.

The yellow metal is back above $1,750 and testing this year’s peak. The road higher has been tough for gold, despite all of the stimulus being injected into the system by central banks, but the dollar’s decline has set the stage for it to set its sights on its all time high.