Oil leads global market tumble on ‘Black Monday’

The collapse of OPEC+ talks over the weekend tipped markets into chaos on Monday. Traders, already on edge due to the unfolding coronavirus epidemic, were sent fleeing to safety after Saudi Arabia slashed its crude oil prices.

Crude and Brent tumbled over 30%, their worst daily performance since the Gulf War, hitting lows below $27.50 and $31.50 respectively. The Kingdom cut prices for April crude by 30% and stated that it intends to raise its output above 10 million barrels per day. Talks at the weekend saw OPEC and its allies fail to agree new terms for an oil production cut; OPEC+ couldn’t even agree to extend the current level of cuts, let alone deepen the cuts to battle the hit to demand from the coronavirus outbreak.

Saudi Arabia is well-positioned to weather weak prices and Russia claims it can withstand the pressure for up to a decade. US shale oil producers, who have flooded the global market with oil to take advantage of supported prices and are heavily debt-laden, could be in dire trouble.

Equities tank

Global equity markets have been sent tumbling. The collapse in the oil markets, combined with news that the Italian government has imposed travel bans on 16 million people, sent investors running from stocks.

US futures went limit down after triggering circuit breakers during the Asian session. After a 5% drop the Dow was indicated to open down over 1,300 points, but based upon the ETF market – which is not suspended – the Dow was looking at a drop of 1,500. Asian stocks took a hammering, with the Hang Seng and the Nikkei both closing over 1,100 points lower.

European equities sank as well, with the DAX, and Euro Stoxx 50, all off around 7%. The FTSE 100, also down 7% to test 6,000, was trading at levels not seen since the immediate aftermath of the Brexit referendum.

Stocks most at risk

While stocks across the board tanked, several industries were hit harder than others.

Oil majors slumped. BP (LSE) tumbled 20%, ExxonMobil dropped 17%, Chevron tumbled 16%, and Occidental cratered 38% – all in pre-market trading on the NYSE – while Royal Dutch Shell fell 14%.

Airlines were hit hard as well after the price slump left them sitting on big losses after hedging oil at higher prices. American Airlines, Delta Airlines, Southwest Airlines and United Airlines were all down 5-6% in the pre-market.

Coronavirus fears weighed on tech stocks. The FAANGS all recorded losses in the range of 6-7%, but cruise ship operators were hit harder. The US government warned American citizens not to go on cruises. Carnival – the company that owns many of the ships currently stranded due to on-board quarantines – dropped 10%, Norwegian Cruise Lines tumbled 11%, and Royal Caribbean Cruises slumped 12% – all before the markets opened.

New record lows for US bonds

The flight to safety drove the yield on US government debt down to record lows. Yields move inversely to prices. The yield on the US 10-year treasury bond fell to 0.32% while the yield on the 30-year treasury note fell towards 0.7%, breaching 1% for the first time in a year.

Gold traded around $1,673 after hitting $1,700 over the weekend.

Cryptos join in with global market chaos

The cryptocurrency market is no stranger to volatility. The world’s largest cryptocurrencies were down around 10-15%, with Bitcoin falling below $8,000.

Markets still rattled by coronavirus fears after yesterday’s brutal sell-off

Investors fled to safety en masse yesterday as a spike in coronavirus cases in Italy, South Korea, and Iran raised fears that the outbreak was becoming a pandemic.

$1.5 trillion was wiped from global equity markets; the Dow recorded only its third ever 1,000 point drop, and the VIX ‘fear index’ spiked to the highest levels since January. Oil sank 4% and gold leapt to a seven-year high.

Today, the sell-off has paused, but the market is hugely indecisive.

Stocks, oil, volatile as markets await next major development

Since the European open today we’ve seen major indices like the DAX, FTSE 100, and Euro Stoxx 50 extend gains towards 1%, drop to multi-month lows, and rebound above opening levels. US stock market futures have gone from indicating a 200-point gain for the Dow on the open to minor losses, and back to signalling a positive open.

The FX market continues to see a shift towards the safety of the US dollar, although cable has managed to hold some gains despite easing back after rising to test $1.30 earlier in the session.

Gold is down around 0.8% and silver has suffered losses of more than 1.3% on profit-taking, but risk-appetite is clearly still absent as crude and Brent oil are struggling to hold opening levels. Like stock markets, the two benchmarks climbed on the open, then fell into the red, before recovering somewhat.

New coronavirus cases reported in Italy, Iran, Austria, Croatia, Tenerife

Markets are caught between buying the dips and pricing in further worrying developments. The first case of coronavirus has been reported in Southern Italy, and Austria and Croatia have reported their first cases today as well. The two Austrian cases are in the province of Tyrol, which borders Northern Italy, while the young man infected in Croatia had recently returned after spending several days in Milan.

Meanwhile, hundreds of people are being tested and many guests quarantined in a hotel in Tenerife after a case of the virus was confirmed there. Iran has also provided an update on the outbreak there: the number of cases is up to 95 and 16 people have died – the Deputy Health Minister is one of those infected.

We’ve also had a slew of companies warning that COVID-19 will impact their earnings. UK blue-chips Meggitt and Croda are weighing on the FTSE 100 after issuing warnings over the impact of the virus upon their businesses.

Markets may gain more direction when the US markets open, but even then uncertainty looks to be the order of the day.

European equities rise as China eases

Police in Hong Kong are investigating an alleged toilet paper heist, amid a shortage due to the coronavirus outbreak. Things are bad when loo roll becomes currency.

It’s a dull old session out there today: European shares were a little indecisive at the start of play following a mixed bag overnight in Asia, but are leaning higher with stimulus from China helping to lift the mood. Basic resources stocks were among the biggest gains on the FTSE as the blue chip index moved to try to reclaim the 7500 level, last some way short at 7445.

Shares in Hong Kong and Shanghai advanced as China cut a key medium-term interest rate, while Tokyo shares slipped on growth concerns. Markets are betting this will be only a part of a wider stimulus programme to offset the economic damage wrought by the Covid-19 coronavirus – the PBOC has already been injecting liquidity and there will no doubt be more to come. China reported another 2k cases by Sunday night, taking the total to more than 70k.

US stocks finished higher for the second straight week. Markets in the US will be closed today for Washington’s birthday but have rolled into the holiday in fine fettle. Industrial productions were weak, down 0.3% in January, largely down to Boeing. Ex-aircraft production, factory output rose 0.3%. Retail sales showed the US consumer started the year in decent shape, with headline sales +0.3% month on month.

There are growing fears about the economic impact. Japan’s economy shrank at the quickest pace in six years in the last quarter of 2019 – down 6.3% as the consumption tax hike hobbled the economy far worse than thought.

Most think to hit to tourism and exports resulting from the outbreak will mean the economy contracts again in the March quarter, pushing Japan into recession. Meanwhile Singapore has slashed its growth outlook for 2020.

Oil is higher above $52, having closed last week well. Look like a base has been formed at $50, looking to cement gains north of last week’s highs at $52.2.

In FX, there are tentative signs of stabilisation and basing for EURUSD. Speculators have not been this net short since Jun 2019, with net shorts at nearly 86k, contracts so the short-euro trade is very crowded. As ever this CFTC data is a week old so I wouldn’t be surprised if the next set of data showed deeper net shorts towards 100k corresponding to the dove under 1.0880. The inverted hammer on Friday suggests near term reversal but until 1.09 is reclaimed the bears remain in control.

Sterling is giving a gallic shrug to some French fighting talk vis-à-vis Brexit trade talks. GBPUSD is steady at 1.3040, with support at 1.30 and near-term resistance seen at the 50-day moving average at 1.3070.

Oil and gold spike, risk offered on US-Iran tensions

January has started 2020 with a flurry of risk-off moves as investors seek shelter from the risks of Gulf War III. The US air strike on Iran’s top general is the major focus for the markets, particularly energy markets. The killing has lit a fire under oil and gold as US-Iran tensions necessitate a higher geopolitical risk premium. 

Risk is offered – European equity market sentiment is weaker on Monday morning and the major indices are lower. US markets closed weaker on Friday. Even in the event of a limited conflict in the region, I would question just how long this will persist when it entails leaning against the Fed, which looks more than ever like its happy to cut to the bone to let the economy run hot and drive inflation to 2%. 

WTI spiked north of $64 but has failed to make a sustained push beyond the May 2019 highs. For this to really make a difference we should be looking for a rally above the Apr 19 highs at $66.60. If that does not get taken out then we may consider the gap to be open to filling. Brent has topped $70 for the first time in three months but again we are looking to the May 19 peaks above $73 to signal a step-change. Fundamentally oil markets are just not as exposed to oil price shocks as they were in days gone by. US shale and a host of production sources coming on stream mean the threat to global supplies from a Middle East conflict is, though significant, not gargantuan.

We have seen similar moves as those seen in the wake of the Iranian attack on Saudi Arabian facilities in September. That time the gap was filled relatively swiftly as there was no retaliation by Riyadh – there was no escalation. We are in a different territory here and a new order of magnitude, but the rules are the same.

The big uncertainties right now for crude centre on the Iranian response to the killing and on that front we should expect some kind of a response. Will Tehran target US bases? It could focus more on shipping in the Strait of Hormuz, but we have already seen attacks on a US base in Kenya killing three and rockets fired into the Green Zone in Baghdad. Iran does not need to use conventional military forces to respond and indeed so far it has not delivered a conventional military response despite all the chest thumping. It does not want to give the US further excuses to bomb it to the ground with an overt reply. Trump is no Obama – enemies believe he will strike. The White House has said it has 52 Iranian targets it will hit if Iran retaliates. European powers are calling for restraint, but the war is already raging. Whether it escalates into large-scale attacks over the coming days and weeks, and grows into a full-blown US-Iran conflict, is very hard to say. But the risk premium genie is out the bottle again. 

Tehran has however all but pulled out of the 2015 nuclear agreement, saying it will no longer limit its centrifuges for enriching uranium. This unleashes the prospect of Iran acquiring nuclear capability in the near future – given the US is already exerting ‘maximum pressure’ this risks pre-emptive actions on the part of the US a la Gulf Wars 1+2. Fundamentally there may be a bigger risk long term by Iran holding back from responding today and focussing on getting a nuclear weapon. My sense – and it is only my sense – is that if Iran responds aggressively now the US could set its nuclear programme back years with targeted strikes. 

Gold is on a tear as a result of the heightened geopolitical risk and depressed US yields. Prices for gold jumped to the highest since 2013, rallying close to $1600 at $1588. We need to look for a break north of that round number and then to $1620, the March 2013 peak.  

Data since the Christmas break has not been overly constructive – the US ISM manufacturing PMI fell for a 5^th straight month, slipping to 47.2% in Dec from 48.1% in Nov and marking its worst reading sine Jun 2009. The effects of the trade war are biting – hopes are pinned on the US and China agreeing to the phase one deal this month or we are in for a rollercoaster.

Elsewhere, GBPUSD has settled above 1.30 having been sold off quite heavily over the first two trading days of the year. EURUSD has recovered the 1.1160 level. USDJPY has recovered 108 having taken a seven handle on haven bid. A lot of pressure on that pair as JPY finds bid but it could be overdone. 

This week: 

Brexit withdrawal bill vote – a majority of 80 makes this a formality. 

Fed – Richard Clarida to speak. Minutes from the last FOMC meeting released on Friday show doves have won the day – worries about not hitting the 2% inflation target are prominent. Loretta Mester, a noted hawk, says she is happy to let inflation run above 2% and said accommodation is necessary. The hawks have turned. 

Payrolls – Nonfarm payrolls could well show a softer Dec but seasonal numbers will make it hard to read. Fed is not doing anything but cutting anyway. 

OPEC risks disappointment, US jobs report on tap

OPEC and allies are poised to formally agree to a policy of deeper production cuts, but there’s not a lot for bulls to be glad about. The 500k bpd increase to 1.7m bpd sounds good but only reflects existing over-compliance, led by Saudi Arabia, which has been pumping less than it is allowed, and it’s going to be short-lived. The deal looks at the moment to only extend through the first quarter of 2020. If OPEC doesn’t extend the curbs through to the end of next year it could act as a de facto loosening of supply that markets would punish with lower prices. There’s a real risk that even with deeper cuts OPEC fails to live up to expectations. We could of course see another meeting soon after this one to agree an extension – critical to today’s formal announcement therefore is whether there is any extension beyond March 2020. And we’ll wait to see if any arm-twisting by the Saudis forces Iraq and Nigeria into complying – but why would they bother now when they’ve not complied thus far?

Oil prices are reflecting a tinge of disappointment with WTI softening to $58.40 after hitting a high above $59 yesterday. Brent meanwhile has eased back off the $64 level to trade around $64.30 – importantly on Brent we failed to beat the November high, a sign that the market isn’t buying into this deal. The 200-day moving average remains a hurdle a little above $64. Prices for WTI and Brent are simply back to where they were before the attacks on the Aramco facilities in September. It’s all got a buy the rumour sell the fact look about it. But we must stress that if OPEC accompanies the deepening of cuts with an extension, at least to the next scheduled meeting in June, but perhaps until Dec 2020, prices could enjoy more upside.

There was good news for Saudi Arabia as Aramco priced well at the top of the range and raised $25.6bn in its IPO. A record listing values the company at $1.7tn, but we shall see where the shares head on day one. Regional and domestic investors have come good but the worry is that the big foreign institutional demand has not been there – if you’re just recirculating oil money among Arab states and Saudi households (levered) then what good has this float actually done?

In equities, Asia has been broadly higher amid more upbeat sentiment around trade talks.

Equities stumbled in Europe yesterday but the good old cocktail of trade optimism and a Friday mean they are pointing higher. However some very nasty German industrial numbers have taken the shine of European stocks ahead of the open.

Wall Street was steady with the Dow and S&P 500 trading mildly higher yesterday. Futures indicate more gains today. Trade will be the deciding factor.

After the usual pump and dump comments from Trump saying that trade talks are ‘moving right along’, we got more concrete news on trade as China agreed to cut tariffs on some pork and soybeans from the US, although it did not mention the quantities involved. This could be due to necessity from a shortage of pork because of African swine fever, more than desire to get a trade deal done, but nevertheless it’s pointing in the right direction. Nevertheless, the toing and froing of trade talks continues – we’ll be waiting for any fresh signal and will only believe a deal once it’s been served up on the table, not when the chefs say it’s in the oven.

In FX, the US jobs report is the big set piece event. A very weak ADP reading this week has forced some to revise forecasts for the NFP, although as always stressed, the ADP number is not always a reliable predictor for the NFP. Consensus is 180k but this is affected by GM workers returning. The three bears likely won’t be happy – expect more low unemployment, which is seen at 3.6%, and decent wage growth (3%). But markets are in a reasonable nervous frame of mind right now – a big miss could signal weakness in the US economy  – bears are sniffing around for anything that points to recession.

Last month’s reading showed US labour market strength remains intact: we saw a strong beat for the US labour market report with nonfarm payrolls up 128k in October, well ahead of the 85k expected, whilst there were upward revisions to the prior two months. The August print was revised up 51k to 219k and the September number was hiked by 44k to 180k. The 3-month average at 176k against the 223k average in 2018

Momentum behind sterling remains solid. GBPUSD has continued to drive higher and has consolidated around 1.3160 – perhaps resting for the assault on the May high at 1.31750. Looking at the charts it’s just one bull flag after the other, but possible 14-day RSI divergence should be watched. A debate tonight between Boris Johnson and Jeremy Corbyn may produce some moves – the election is Johnson’s to lose so he simply needs to avoid any booby traps. Polls as ever need to be heeded – latest from BritainElects shows the Tory lead down to just under 10pts. At present it does not look like the gap is narrowing quickly enough for Labour to mount a serious challenge, but upon such complacency have many best laid plans gang aft agley.

The euro remains steady with EURUSD holding onto 1.110, despite some very nasty looking German industrial numbers – down 1.7% vs +0.1% expected. The collapse in German manufacturing is staggering. Whilst PMIs are indicating recovery, these numbers suggest the very opposite. USDJPY has steadied above 108.60 having found decent support on the 50-day moving average.

Elsewhere, gold was down at $1473 having encountered firm resistance on the 50-day line at $1482. At send time gold was trading at $1473, with November lows sitting at $1445.

Week Ahead: Nonfarm payrolls, China PMIs and Eurozone inflation on tap

Welcome to your guide to the week ahead in the markets. China trade talks are ushered in by PMI data, Eurozone inflation results and US nonfarm payroll reports.

US nonfarm payrolls 

The set-piece US labour market report on Friday is the main eco event for market watchers. Signs of a slowdown in employment growth are showing, supporting the doves’ case for further rate cuts. Will we see stronger wage growth though? The NFP report missed expectations on the headline number with employers adding just 130k last month versus the 160k expected. 

China data ahead of trade talks 

The week gets a kickstart with more economic data from China likely to give more clues about the impact of the trade war. The official manufacturing and services PMIs will be followed by the closely-watched private Caixin manufacturing survey in the early hours of Monday. 

Eurozone inflation 

The European Central Bank has cut rates, so what now? Inflation has proved stubbornly weak in the Eurozone, with headline inflation in August of just 1%, while core inflation was a meagre 0.9%. Market expectations for inflation remain subdued. There seems little hope that inflation will start to tick higher and give the ECB some breathing space. Euro area CPI preliminary readings will be delivered on Tuesday morning. 

Brexit 

MPs are back to business, but we don’t know where this leaves the only thing that matters for sterling right now – will there be a deal or not? GBP pairs will remain exposed to headline risk as the market tries to figure out which way the wind is blowing. 

RBA  

The Reserve Bank of Australia is expected to cut interest rates again when it convenes on Tuesday. Speaking last week, governor Philip Lowe gave a very strong signal that rates would be cut again from the current record low 1%.  

Corporate Diary

There are several corporate data releases this week, here are the main ones to put in your diary.

Oct 1st	Ferguson	FY 19 Full Year Results
Oct 1st	Greggs	Q3 Trading Update
Oct 2nd	Tesco	Interim Results
Oct 3rd	Pepsico	Q3 Earnings
Oct 3rd	Ted Baker	Interim Results
Oct 3rd	H&M Group	Q3 Results

Coming Up on XRay

Don’t miss our upcoming video streams on XRay. You can watch them live directly through the platform or catch-up afterwards when it suits you.

07.15 GMT	Sept 30th	European Morning Call
15.00 GMT	Sept 30th	Charmer Trading talks Forex
15.45 GMT	Oct 1st	Asset of the Day: Oil Outlook
19.00 GMT	Oct 1st	Live Trader Training
18.00 GMT	Oct 3rd	The Stop Hunter’s Guide to Technical Analysis (part 5)
12.30 GMT	Oct 4th	LIVE Nonfarm Payrolls Coverage

Key Economic Events

There’s a lot of data coming out in the next few days, particularly at the start of the week.

01.00 GMT	Sept 30th	China Manufacturing and Services PMIs
01.00 GMT	Sept 30th	ANZ Business Confidence
01.45 GMT	Sept 30th	China Caixin PMI
08.30 GMT	Sept 30th	UK Final QoQ GDP
12.00 GMT	Sept 30th	Germany CPI Inflation YoY
03.30 GMT	Oct 1st	RBA Interest Rate Decision and Statement
08.30 GMT	Oct 1st	UK Manufacturing PMI
09.00 GMT	Oct 1st	Eurozone Preliminary CPI
14.00 GMT	Oct 1st	US ISM Manufacturing PMI
12.15 GMT	Oct 2nd	US ADP Nonfarm Employment
14.30 GMT	Oct 2nd	US Crude Oil Inventories
08.30 GMT	Oct 3rd	UK Services PMI
12.30 GMT	Oct 4th	US Nonfarm Payrolls

European equities rally as euro, pound crack lower

European markets were on the front foot on Friday morning despite a weak cue from the US and Asia as currency weakness and expectations for yet lower interest rates fuelled risk appetite. Asian shares plumbed a three-week low but European bourses are trading up again. The FTSE 100 continued the good work from Thursday to hit 7400 and make a clear break out of the recent range. With the move north a decent case to make for the 7450 area, the 61.8% retracement of the August retreat.

The S&P 500 declined quarter a percent to 2977.62 against a back drop of political uncertainty in Washington. Markets won’t like these impeachment hearings but ultimately the risk of Mr Trump being ousted by Congress appears very slim indeed.

Another stinker of an IPO – Peloton shares priced at $29 but were down $2 at $27 on the first tick and ended 11.2% lower at $25.76. First day nerves maybe but this stock has fad written all over it. Think GoPro.

On the matter of dodgy prospectuses and dubious IPOs… S&P has downgraded WeWork debt another notch, and slapped a negative outlook on for good measure.

FX – the euro now looks to be on the precipice, on the verge of breaking having made fresh two-year lows on EURUSD. Whilst the 1.09 level may still hold, the banging on the Sep 3/12 lows at 1.09250 has produced a result with overnight tests at 1.09050. We’ve seen a slight bounce early doors in Europe but the door is ajar for bears. The Euro is under pressure as ECB chief economist Lane said there is room for more cuts and said the September measures were ‘not such a big package’. How much more can the ECB feasibly do?

Sterling is tracking lower against the broader moves in favour of USD. There is a chance as we approach crunch time on Brexit that GBPUSD pushes back to the lower end of the recent range, the multi-year lows around 1.19. Bulls have a fairly high bar to clear at 1.25. At time of publication, the pound had cracked below yesterday’s low at 1.23, opening up a return to 1.2280 and then 1.2230. The short-covering rally is over – time for political risk to dominate the price action.

Bank of England rate setter Saunders made pretty dovish comments, saying it’s quite plausible the next move is a cut. In making the case for a cut now it conforms to the belief in many in the market that the Bank is barking up the wrong tree with its slight tightening bias in its forward guidance. The comments from Saunders are clearly an added weight on the pound.

On Brexit – there’s a lot of noise of course and all the chatter is about MPs’ use of language and how could Boris possibly still take the UK out of the EU by October 31^st without a deal. The fact is he can and he intends to. There is some serious risk that GBP declines from here into the middle of October on the uncertainty and heightened risk of no deal. This would then be the make or break moment – extension agreed and we easily pop back to 1.25, no deal and it’s down to 1.15 or even 1.10.

Data to watch today – PCE numbers at 13:30 (BST). If the core CPI numbers are anything to go by, the Fed’s preferred measure of inflation may point to greater price pressures than the Fed has really allowed for. Core durable goods also on tap, expected -1.1%. Plenty of central bank chatter too –de Guindos and Weidmann from the ECB follow Lane and then Quarles and Harker from the Fed. Should keep us busy this Friday.

Oil is in danger of entirely fading the gap back to $54.85, the pre-attack close, having made a fresh low yesterday at $55.40. There’s still a modicum of geopolitical risk premium in there though, but bearish fundamentals are reasserting themselves over the bullish geopolitics. WTI was at $56.10, ready to retest recent lows at $55.40. Bulls require a rally to $57.0 to mark a gear change. However we are now touching the rising trend support line drawn off the August low at $50, so could be finding some degree of support.

Gold is pretty range-bound now, but we are seeing it test the $1500 level which could call for retreat to near $1482, the bottom of the recent range and key support.

Week Ahead: Inflation readings to shape central bank views

There are a lot of things going on this week, with inflation leading the headlines.

Inflation 

With investors betting the Federal Reserve will cut interest rates again in September, Tuesday’s US inflation figures will be of key importance for the direction of global markets. Core CPI advanced 2.1% in June, its biggest increase in a year and a half. If inflation pressures continue to build, it could undermine doves on the FOMC calling for more hikes. UK inflation figures are released on Wednesday. 

China and Germany growth 

Fears about a slowdown in China and Germany are at the heart of investor concerns for the global economy. As such a batch of data from the two countries this week will be important for risk assets. China’s industrial production figures and the German preliminary GDP print on Wednesday will be the most closely watched. 

Walmart and US retail sales  

Q2 earnings season is well past its peak but US retail giant Walmart delivers its quarterly numbers on Thursday before the market opens. Q1 earnings were a positive surprise with EPS of $1.13 beating expectations of $1.02. The key comp sales number hit 3.4%, making it the best quarter in 9 years. Despite fears for the US economy, consumer confidence and retail sales gauges remain robust. On that front, US retail sales numbers are due on Thursday shortly after Walmart reports. 

Tencent and Alibaba 

We’ll also be watching earnings from China giants Tencent and Alibaba. The ongoing trade dispute between the US and China is sure to be a weight, however Chinese consumers have remained relatively robust. For Alibaba, in addition to its ecommerce platform, we’ll be watching to see how well its cloud computing business is doing. Both represent important bellwethers for the Chinese economy. 

Earnings season is still going strong, with these earnings releases in the next week.

Pre-Market	14th August	Tencent Holdings Ltd – Q2 Earnings
After-Market	14th August	Cisco Inc – Q2 Earnings
Pre-Market	15th August	Walmart – Q2 Earnings
	15th August	Alibaba – Q2 Earnings
After-Market	15th August	NVIDIA Corp – Q2 Earnings

Tune in live or watch on catch-up.

07.15 GMT	12th August	European Morning Call
17.00 GMT	12th August	Blonde Markets
12.30 GMT	13th August	LIVE: US CPI Coverage
15.30 GMT	13th August	Asset of the Day: Bullion Billions
10.00 GMT	15th August	Walmart Earnings Preview: LIVE

Watch out for the following economic events in the coming week.

08.30 GMT	13th August	UK Average Earnings
12.30 GMT	13th August	US CPI Inflation
09.00 GMT	13th August	Germany ZEW Economic Sentiment
01.30 GMT	14th August	Australia Wage Price Index
02.00 GMT	14th August	China Industrial Production
08.30 GMT	14th August	US CPI Inflation
01.30 GMT	15th August	Australia Unemployment Rate
08.30 GMT	15th August	UK Retail Sales
12.30 GMT	15th August	US Retail Sales, Philly Fed Manufacturing Index

Dow off 575 points; Market turmoil deepens as trade war panic sets in

Where to start? Last week’s surprise announcement from President Donald Trump of new tariffs against China continues to panic markets. Just when it looked like relations were beginning to thaw again, we’re back where we started.

The trade war looks to have no end in sight. The new 10% tariffs on $300 billion of additional Chinese goods could be raised higher. It may even go above the 25% level imposed upon other imports. Beijing has already retaliated (even though the new tariffs don’t come into effect until September): the People’s Bank of China has let the yuan depreciate to its lowest levels in years.

Incredible losses for Dow: Equities hammered again as sell-off deepens

Two weeks ago the stock market seemed like a rosy place. Belief was that the Federal Reserve was about to start a sustained cutting cycle, and that US-Sino relations were on the mend.

Fast forward to today. The Dow is off a whopping 575 points, the SPX is recording 2.2% losses, the FTSE 100 is at a two-month low and the Dax is not far off the lows of April 1st. The ASX has plunged 2.8%, or 191 points, while the Hang Seng has been knocked for six, with losses of 3.8% or 1,000 points taking it down to lows not seen since January 8th.

Meanwhile, the VIX is up two points and challenging the highs of early May.

FX: Chinese Central bank braces for trade pain with yuan devaluation

The yuan is trading above 7 per dollar for the first time in over a decade today after the People’s Bank of China set the daily mid-point of its trading range at US$6.9225.

The dollar may be up against the yuan – and the commodity trio – but elsewhere it is sliding. EUR/USD has leapt 0.6% to trade around 1.1175, USD/JPY has dropped half a percent to trade just above 106, which makes it very likely it’ll be the lowest close of 2019 for the pairing. Meanwhile the greenback has dropped 0.8% against the Swiss franc to 97.50 – its lowest level since the end of June.

While Sterling is holding its ground against the dollar, elsewhere it has tumbled as well. A spokesperson for the European Commission has claimed that the current Brexit agreement is the ‘best deal possible’, denting hopes that Brussels will budge and open the way for more negotiations ahead of the October 31st deadline.

Gold surges as investors flee to safety, oil slides further

Gold is up 1.8%, adding around $25, to trend around $1,465 as markets dump risk and look for shelter in safe-haven assets. Silver has jumped 1.8%.

Meanwhile, crude oil has dropped 1.4% to trade below $54.50 and Brent is down 1.2% and trading around $60.60 after giving up support at $6.

Natural gas is taking an absolute hammering, off more than 5% and trading around $2.035 – not that far from the key psychological $2.00 handle.

Cryptocurrency: Sell off? What sell-off?

Things are much rosier in the cryptocurrency market today, with Bitcoin up 14% to test the $12,000 handle again. Litecoin is up 6.2% ahead of this week’s halving, Ethereum has gained nearly 5%, and Bitcoin Cash and Dash are both trading up 3.3% on today’s opening levels. Ripple is something of a straggler today, registering comparatively small gains of 1.5%.

Some view cryptocurrency as something of a safe-haven, with the equity sell-off prompting many to pile into cryptos.

Trump blows up markets with surprise China tariffs

All hell broke loose in the markets yesterday and continues today. with the sharp shooters having given way to the heavy artillery.

The trade war just got very hot, just as we thought things were improving. And just as the Fed had come up short as far as the market is concerned. What can the Fed do now?! Markets are like Test matches – you think you’re on top and suddenly a big hitter comes to the crease and knocks you all the park.

Donald Trump torpedoed the markets with a surprise decision to slap a 10% tariff on an additional $300bn in Chinese goods effective Sep 1st. China is sure to retaliate – this is real escalation.

Commodities hammered as risk-appetite evaporates

Risk assets took a pounding and gold rallied very hard from its lows of the days. Gold found bid to rally about $40 off its lows – incredible. It has eased back slightly today but still remains around a two-week high. Bond yields have sunk as investors sought shelter. These kind of risk-off moves are quite phenomenal.

Oil was absolutely hammered. We saw enormous selling in crude oil and Brent with the latter retreating to the $60 handle. Having been hanging around the $63 mark it gave up 5% in a matter of minutes. WTI shipped $4 from $58 to $54 in minutes too. Those are big, big moves and highlight the kind of sensitivity the market has to trade. Today the two benchmarks are on the rise, but even with gains of 1.5% for crude and 1.9% for Brent yesterday’s pre-announcement levels are still far away.

Equities sink on tariff drama

US equity markets, which had been in the green, turned sharply lower. SPX dropped 40 points or so from its highs in short order to breach the key 2970 level and trade around 2952 at the lows. Today is has shed another 6 points to trend around 2,943 – after a brief drop all the way down to 2,933.

European indices are still being hit hard – the FTSE 100 is off 0.75% to trade around 7,446, while the DAX has drop a whole percentage point to trade sub-12,000.

FX: Yen leaps on flight to safety

Bid for the yen, which had been strengthening all day, accelerated markedly as USDJPY returned to the 107 handle – and today it dropped lower, bouncing off support at 106.70 to trade a little shy of 106.90. GBPUSD has held its ground and the euro also a touch firmer as the dollar has taken a knock. USDCNH has firmed up – a possible retaliation by China is to let the 7 handle be breached. Australia’s dollar has been hit for six.

All bets are off as trade war escalates

The new tariffs have completely taken the market off guard. You have to question the motives when a) the trade team have been in China this week conducing talks, and b) it’s coming just a day after the Fed disappointed the president by not signalling enough cuts. Trump got his cut, so he’s pushing China again. It’s just gaslighting.

Your move, Beijing…