China Trade Deal Is Still Intact
Last night was one hell of a night for investors. The US stock index futures slid by more than 400 points after White House trade adviser Peter Navarro said that the trade deal ‘is over’ on Fox News. This came after the long tension between China and the US over the handling of coronavirus pandemic.
Later, Navarro said that his comments were “taken wildly out of context”. He said it has nothing to do with the phase one trade deal, which continues in place. Shortly after, Trump also said via Twitter on Monday night that “The China trade deal is fully intact. Hopefully they will continue to live up to terms of the Agreement”.
Coronavirus News Feeds Continue To Be The Major Highlights
With increasing efforts to reopen the economy across all fifty states in the US. As the market appears to look more hopeful amid business activity gaining ground. Market sentiment seems to cool on news of the spike in cases in certain states. But not to the extent of what we saw in March.
Despite seeing more cases, we note that the number of deaths is declining. That shows the healthcare system is beginning to deliver some positive results. The world is in a better position now if you compare it to a few months ago, with various potential therapies on trial. With social distancing and face masks now mandated in certain states, hopefully, this could slow down the transmission of viruses and eventually eliminate them.
There has been quite a bit of investors’ optimism over the prospect of a global economic recovery. This has been challenged by a resurgence in Covid-19 cases in the US and China, as well as parts of Europe and the Americas.
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US Stock Futures Reverse Course After Trump’s Reassurance
US equity futures reversed losses after Trump said the trade deal is still intact. Global stocks also rebounded from sharp dip after Washington retracted Navarro’s comment. With positive sentiments across Asia and Europe, we could expect the same outcome for the US stock market today.
The friction between US and China seems to return to the fore after the controversial national security law in Hong Kong, a semi-autonomous territory. Not to mention the mistrust between both China and the US on the handling of the coronavirus outbreak. This does indicate that the market remains very sensitive to US-China tensions. Any slight negative remark could put a blow to the performance of the global equity market.
Oil Price Climbed Higher On Global Recovery Trade-Winds
With hopes of business activities resuming globally, WTI oil has rebounded to $40 per barrel whereas Brent crude is at $43.38 per barrel (at the time of writing). Some analysts have come out with bullish forecasts for the near term. But, plenty of risks remain. With infection rates not slowing down in key markets, it is reasonable to assume that we are going to deal with sluggish oil prices in a prolonged period.
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Gold Likely To Hover Around High Range
The return of the global recovery trade with a lower dollar did not stop the enthusiasm of gold investors yesterday. Gold climbed to an intra-day high of $1763.00, brushing slightly away from the $1765.00 multi-month resistance. The higher gold price appears to be contributed by some strong tailwinds from the US bond market.
However, investors must be cautious and treat the rally of gold price with not more than a pinch of salt. We’ve seen this before, with bulls severely disappointed as gold retreated from this resistance zone. Until we have consistent gold price above $1765.00 for an extended period, caution is warranted as a bull-trap is possible.
Looking forward, the US-China story and the pandemic updates are likely to keep entertaining gold traders. Additionally, the preliminary readings of June month PMIs for the key global economies might offer additional clues.