Equity bulls out of ammunition?

7 February, 2019

It is shaping up to be a dull day for financial markets with equities across the world struggling for direction due to a lack of fresh catalysts. Stocks in Asia witnessed another muted session today as many markets in the region remain closed for the Lunar New Year holiday. In Europe, shares got out of the wrong side of the bed thanks to weak earnings from French banking group BNP Paribas and disappointing data from Germany. While Wall Street has the potential to extend gains this afternoon on strong corporate earnings and cautious optimism over US-China trade talks, the medium- to longer-term outlook for equity markets tilts to the downside. Concerns over slowing global growth remains a dominant theme while the unpredictable nature of trade negotiations has certainly left investors on edge. With other geopolitical risks such as Brexit, China’s slowdown, Eurozone growth concerns and political turbulence in Washington seen stimulating risk aversion, the ingredients are in place for a stock market sell-off.

Investors who were expecting fireworks and action from US President Donald Trump’s State of the Union address were left empty handed after nothing new was brought to the table. While Trump discussed trade relations with China, border security and the budget, this was of no real interest to markets and such was reflected in the muted reaction. With Trump failing to provide fresh insight into the progress over US-China trade talks and the March deadline looming, sensitivity to trade developments is poised to heighten moving forward.

Brexit uncertainty and growing pessimism over Theresa May’s ability to secure further concessions from the EU continues to weigh the Pound. With the European Union already stating that the Withdrawal Agreement is “not open for re-negotiations” it will be interesting to see what the prime minister achieves from her trip to Brussels. While negativity over Brexit is likely to continue punishing the Pound in the short term, the currency could receive a boost if expectations mount over the government delaying Brexit by extending Article 50. Although the Bank of England policy meeting is on Thursday, we expect the Pound to offer a muted reaction to this risk event as Brexit continues to overshadow economic fundamentals.

In the commodity markets, Gold is trading lower today thanks to an appreciating Dollar. While the precious metal is seen extending losses in the near term, bulls still remain in control in the medium to longer term. For as long as global growth fears weigh on market sentiment and expectations mount over the Fed taking a break on rate hikes this year, Gold will continue shining. Focusing on the technical picture, the precious metal has the potential to rebound towards $1,320 if $1,308 proves to be reliable support. A breakdown below $1,308 is likely to invite a decline back towards the psychological $1,300 level.


Source link  
Oil rebounds on geopolitical tensions

It has been a rollercoaster trading week for oil markets as investors tussled with conflicting fundamental themes pulling and tugging at the...

Markets hit by caution ahead of US retail sales data

The mood across financial markets was cautious this morning as rising geopolitical tensions in the Middle East and persistent...

Gold sinks to fresh weekly lows

Gold stumbled to a fresh one-week low on Tuesday as cautious optimism over global trade developments boosted risk sentiment and dampened...


Global trade developments drag on

Asian equities were mostly lower on Wednesday morning as risk sentiment swung back to caution on persistent US-China trade tensions...

Stocks fight for gains

Asian stocks advanced on Tuesday, while US and European equities are poised for more gains, even as heightened trade tensions and persistent concerns over global growth test risk sentiment.

Pound weeps as political clouds gather

Today was a sad day for the British Pound which depreciated against every single G10 currency. The toxic mixture of political drama in Westminster and...


Gold fails to recover above $1280

The past few days have certainly not been kind to Gold and this continues to be reflected in the bearish price action. Conflicting signals over...

Risk sentiment takes advantage

Traders are taking advantage of a lull in news flow stemming from US-China trade tensions to send Asian stocks higher, after the S&P 500 posted...

Market sentiment influenced

Investor sentiment has swung back and forth this week due to the persistent uncertainty and ever-changing jigsaw puzzle that is being mapped...

  


Share it on:   or