Risk off slowly started to take over the markets with US bourses closing lower for a second day on Wednesday as Wall Street took a pause following a strong rally. Stocks in Asia are noted a bearish close on Thursday with Hong Kong shares falling after mass protests amid violent clashes between protesters and riot police over a controversial extradition bill. Nikkei finished the day 0.57% lower.
Uncertainty Overwhelms the Markets
In Europe, stocks opened lower again this morning amid deepening Brexit uncertainty. Specifically, UK lawmakers signaled the country is still open to leaving the EU without a deal, spreading investor unrest. Elsewhere, Goldman Sachs and UBS voiced their opinion publicly about why they do not think the Fed will cut rates soon, which the market seems to be pricing in heavily already. Meanwhile, Dow futures point to another bearish open as trade tensions continue to heat up.
Trade Tensions Intensify
On the trade front, U.S. President Donald Trump reiterated his threat of increasing tariffs on another $325 billion of Chinese goods if there is no agreement, but declined to set an exact deadline. Overall, the relationship between China and the US is worsening with China's state media publishing more heavyweight commentaries criticizing the US and demonstrating China's determination.The US is further planning a big transaction with Poland and considers sanctions to block North Stream 2 and prevent Germany from becoming reliant on Russian energy.
Forex Preview: Trade War Feeds the Greenback
Despite a softer CPI yesterday, the further escalation of trade tensions seems to keep the USD up on safe haven demand. Traditional safe haven currencies like the yen are gaining broadly today as risk appetite ebbeds. The euro was pushed back to the 1.13 as the USD strengthened, while the GBP dropped against the USD as Brexit fears intensified. The Swiss National Bank (SNB) kept rates pat during its monetary policy decision this morning, but the CHF could strengthen further as global risk appetite cools down.
Oil Prices Recover
Oil prices recovered on Thursday, after posting declines of as much as 4% in the previous session, on continued increases in U.S. crude stockpiles. Brent and crude added more than 2.5% respectively after a unit of the United Kingdom’s Royal Navy said it was aware of an incident involving a tanker in the Gulf of Oman near the Iranian coast.
Gold Advances, BTC Steadies
Gold prices also advanced this morning as demand for the safe-haven metal rose on expectations of an interest rate cut by the U.S. Gains were capped by a robust dollar but the noble metal has managed to remain above $1335. Elsewhere, BTC is trading within the 8k now again and suggesting constructive price action with a daily close yesterday above the 10-day EMA.
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