Overnight on Wall Street: Tuesday 27/08/19

The current sentiment in the markets reflects the calm of the eye of a storm. The positive trade comments from China and the US have temporarily brought some relief in the financial markets.

• “We believe that the escalation of the trade war is not beneficial for China, the United States, nor to the interests of the people of the world.”
• “China had contacted US trade officials overnight to say it wanted to return to the negotiating table.”

It was a remarkable turnaround as investors were buoyed by the hopes that both countries will return to the negotiating table. Stocks have multiple days of 1% swings this month and volatility could continue as the month winds down.

All major US equities indices ended in the green:

• Dow Jones Industrial Average ended 270points higher at 25,899.
• S&P 500 rose by 31 points at 2,878.
• Nasdaq Composite added 102 points to 7,854.

Currency Markets

In the FX market, we saw a few bearish gaps on Monday open amid the US-China trade war escalation. In the Asian session, risk currencies such as the Antipodeans bore the wave of risk-aversion and broke key levels to the downside.

However, the markets witnessed some relief following the conciliatory remarks from China’s Vice Premier, Lui He followed by Trump at the G7 summit. Safe-haven currencies like the Swiss franc, and Japanese Yen which rallied in the morning, had eased back in the European and US session.

The Aussie dollar emerged as the best performing currency against the US dollar. As of writing the Aussie dollar is buying at 67.75 US cents.

Source: Bloomberg Terminal

Commodities

The oil market swung between losses and gains as the US and China attempted to tame down the rising trade tensions. Despite the larger-than-expected draw of crude oil inventories last week, the oil market struggled to gather upside momentum. The demand outlook remains the dominant downside risk for the oil market.

As of writing, WTI and Brent Crude were trading lower in the vicinity of $53 and $58 region.

UKOUSD and USOUSD (Hourly Chart)

Source: GO MT4

Gold rose to a high of $1,554 yesterday morning but had pared some gains as risk sentiment improved. However, as the yellow metal was still trading above the $1,500 mark as risk sentiment remains fragile.

XAUUSD Chart

Source: Bloomberg Terminal

Cryptocurrencies

Cryptocurrencies were also seen rising yesterday. Bitcoin rallied to a high of $10,624, but the pair is finding some resistance above $10,500.

As of writing, the BTCUSD pair is currently trading at $10,320.

BTCUSD (Hourly Chart)

Source: GO MT4

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