Air of caution in markets

24 June, 2019

There’s an air of caution in the markets at the start of a week that’s bookended by new US sanctions on Iran and the meeting between US President Donald Trump and Chinese President Xi-Jinping. Asian stocks are seeing a mixed Monday morning, while futures for the S&P 500 remain steady, indicating that equity bulls are losing some momentum ahead of a crucial catalyst for risk sentiment.

The outcome from the Trump-Xi meeting promises significant implications for investors who are finalizing their outlooks for the second half of 2019. Markets are expecting to see whether the US-China brinkmanship will give way to a truce that could ease trade tensions, or if markets will still have to contend with the protracted standoff over the coming months.

While the Trump-Xi meeting is a meaningful step towards de-escalating tensions, markets could also be left disappointed if the high-stakes meeting yields naught, leaving the status quo of the heightened conflict intact. Such a risk suggests that investors would want to avoid getting ahead of themselves in anticipating a market-friendly outcome from the meeting.

Oil jumps on new US sanctions on Iran


Both Brent and WTI are climbing by over 0.6 and 0.8 percent respectively at the time of writing, after President Trump tweeted about placing “major additional sanctions on Iran” on Monday. This is stoking market concerns that heightened geopolitical tensions could ultimately weigh on the global supply of Oil. In the meantime, energy stocks in Japan and Australia are climbing higher, contrasting the losses in their respective benchmark equity indices.

Oil’s recent surge frames the OPEC+ meeting next week, as Oil producers face the delicate task of rebalancing Oil markets. While rising geopolitical tensions have been doing the legwork for OPEC+ in sending crude higher, the demand outlook remains plagued by uncertainties surrounding US-China trade tensions, which threatens to be a major drag on Oil consumption through the rest of 2019. Unless there’s a seismic shift in the supply-demand equation this week, the OPEC+ alliance may have little choice but to extend its supply cuts into the second half of the year, which should help support Oil prices.

Gold to remain support amid global uncertainties


Gold’s stay above the psychological $1400 mark highlights the cautionary tone across various asset classes on Monday. Rising geopolitical tensions as well as the uncertainty over the US-China standoff ensure that safe haven assets remain in a supportive environment for the time being.

While it’s hard to imagine US-led tensions melting away rapidly in the immediate-term, recent history has only demonstrated that the geopolitical landscape remains highly fluid and can turn on a dime. Still, any potential declines in Gold triggered by de-escalating in tensions over the near-term should be mitigated by the expressed easing bias out of major central banks.


Source link  
Markets turn cautious and vigilant

An air of caution is lingering across financial markets as investors huddle on the sidelines ahead of Fed Chair Jerome Powell's highly anticipated...

When bad news become good news

Global stocks and bonds have been surging throughout the past week with all major US equity indices reaching new record highs...

Investing in a late-cycle economy

Fixed income and stock markets waltzed in tandem in the second quarter of 2019, yet continue to tell a different story. Bond yields dropped dramatically, not just...


Safe haven assets restore gains

Despite all the hype, the US-China trade truce hasn't been able to sustain risk sentiment. Anxious investors flocked to safe haven assets, sending...

Asian assets enjoy time in the sun

Asian equities and currencies are benefitting from the feel-good mood in the markets after US President Donald Trump and Chinese President Xi Jinping...

Confusion lingers over direction of trade talks

Conflicting signals over the direction of trade between the world's two largest economies are set to disrupt and destabilize the...


Hunt for market equilibrium continues

Markets are still searching for that equilibrium between anticipating the next Fed rate cut, while President Donald Trump and President...

Dollar erases 2019 gains

The Dollar Index (DXY) is now trading below the psychological 96 mark and erased all of its year-to-date gains, with G10 and Asian currencies...

Bank of England last to stand downbeat

There are no real surprises that the Bank of England (BoE) left interest rates unchanged at the conclusion of its latest monetary policy meeting today

  


Share it on:   or