Market confusion spurs appetite for safe havens

Global stocks were left depressed following last week’s mixed US labor report which enforced a wave of confusion across the financial markets as sentiment towards the US economy was torn in various directions. Despite most regions in Asia closed for the Chinese New Year celebrations, Asian equities received punishment during trading on Tuesday as the Japanese stocks plunged amid the heightened unease over slowing global growth. This uncertainty over the current economic landscape has already pressured European equities and should rollover towards the American equity arena as risk aversion repels investors from riskier assets. It must be understood that confidence towards the global economy remains strikingly low, while the bitter decline in oil prices has soured risk appetite consequently obstructing any solid recovery in the stock markets.

WTI presses against $30

The ongoing concerns around the excessive oversupply of oil in the global markets have left WTI under immense pressure while elevated fears over slowing global growth continue to sabotage a recovery in prices. Sentiment remains firmly bearish towards oil and the fruitless emergency meeting between OPEC producers, Saudi Arabia and Venezuela, only encouraged sellers to attack prices further. The visible conflict of interest among OPEC cartel members suggests low oil prices may be around for an extended period, while Iran’s quest to unleashing more supply in an attempt to reclaim lost market share has punished prices further. This commodity is extremely bearish and a solid close below $30 should encourage a further sell off towards $28.

From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. A daily close below $30 should encourage sellers to target $28 and potentially lower.

The economic calendar is fairly light today so investors may direct their attention towards Janet Yellen’s appearance at Congress on Wednesday where she will testify and provide clarity on how the Fed plans to raise US rates in such turbulent economic conditions. Friday’s mixed US labor report combined with the string of soft economic data from the States has almost erased the possibility of a March rate hike as the Fed futures point to a 2% probability. The heightened fears over slowing global growth, China woes, and falling commodity prices have exposed the US economy to some downside risks and it will be interesting to hear Janet Yellen’s thoughts on this throughout this trading week. Sentiment continues to remain weak towards the Dollar and the fading expectations around US rates being hiked in 2016 should encourage more Dollar selloffs in the near term.

Commodity Spotlight – Gold

The growing anxieties over the state of the global economy complimented with erratic swings in the oil markets continue to boost appetite for safe haven assets such as Gold. This bullish yellow metal has surged to fresh 7 ½ month highs at $1200 and the dimming expectations that the Fed may hike US rates again has offered an opportunity for bulls to install another round of buying, with targets stretching to levels not seen since May 2015 at $1230. Friday’s mixed NFP report which promoted Dollar weakness should act as an encouragement for bullish investors to send prices above the stubborn $1200 resistance in the near term.

From a technical standpoint, Gold is bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above bother the daily 20 and 50 SMA while the MACD has also crossed to the upside. A solid break above $1200 should invite a further incline towards $1230.