Markets get lost in the fog | Daily Market Commentary with Jeffrey Halley
The US stock markets fell approximately one percent in the overnight session as traders worried the US and China would not complete a trade deal by 1 March. News of the potential US government shutdown resuming on 15 February has been quiet but has most certainly not gone away.
The news wasn’t particularly good in Europe either (I’ll include the UK in this – for now). The Bank of England (BOE) lamented the “fog of Brexit” and its effects on future UK growth. Not to be outdone, the European Central Bank (ECB) downgraded growth across the eurozone, and Germany announced abysmal industrial production numbers.
Hong Kong returns from Lunar New Year holiday today with the tone of Asian markets likely to be “cloudy” following the overnight sessions. We have a very light calendar globally with German exports expected to be watched closely for further signs of deterioration. Canada’s employment data should spark some short-term volatility.
In Asia Pacific, the Reserve Bank of Australia (RBA) Statement on Monetary Policy will be the regional highlight and will be dissected in detail following their shift in stance on rates this week.
The US dollar strengthened overnight, due more to the travails of its counterparts than a strong dollar story. EUR and GBP continued to wilt as poor Eurozone data, and the Brexit impasse continued. This theme could extend to the Asia session.
The AUD and NZD consolidated after yesterday’s aggressive sell-offs. The technical picture looks grim for both with any recovery looking like a dead cat bounce.
Regional currencies could weaken today in the face of a generally stronger USD.
Asian bourses will likely follow the lead of North America and fall gently today as the week draws to a close. The exception could be Australia, which has enjoyed an excellent week, supported by higher iron ore prices, a dovish RBA and a weaker currency.
Gold prices rose four dollars overnight to 1,308.00, shrugging off a stronger dollar. US-China trade worries continue to see safe-haven buyers looking to pick up gold on price dips. Gold continues to consolidate above the 1,300.00 level.
Brent and West Texas Intermediate (WTI) fell 2.50% and 1.60% respectively overnight as the dollar strengthened and the weather improved in the US. A lack of news will likely mean listless trading in the Asian session with oil moving inversely to the dollar.