Markets, Trade War, Oil, Bitcoin, Gold

Markets stable as Trump reassures Wall Street

The markets are looking a little flat on Wednesday, with investors soothed by the calming words of Donald Trump who sought to reassure us all that the trade war with China is merely a little squabble.

After freaking out at the beginning of the week, investors have quickly settled down and, it would appear, decided hope is more preferable than reality. Over the last week we’ve had more tariffs imposed between the world’s two largest economies and this morning Chinese data has seriously disappointed and yet, investors are calm.

It’s hard not to think that Trump had an eye on Wall Street when he made the latest comments on China, with those previously that contributed to the decline, having been far harsher. Still, those soothing tones appear to have worked for now, the only question is how long it will last.

Already Trump has sought to divert attention to the central bank once again, claiming that if they only cut interest rates, the trade war would be won. That of course is not the job of the central bank and a prime example of why it is independent but it will be a convenient target should the economy take a turn and the trade war drag on into 2020 when the President has an election to contend with.

Oil prices lower as we await more inventory data

Oil prices are a little lower heading into the US session as we await more inventory data from EIA. API reported another large inventory increase on Tuesday, which failed to generate too much of a response but may weigh on prices going forward if backed up by the report today.

Lower output from OPEC in April, led by a reduction in Iranian exports, will continue to offer the bullish case for oil as the cartel seeks to reduce the overstock and raise prices to a more sustainable level. Of course, falls in Iranian output is being driven by US sanctions, rather than being part of the output deal but as long as the outcome is the same, the Saudi’s and others won’t be incentivised to jump in.

Is bitcoin still the wild west?

Bitcoin prices are looking a little steadier today as the initial hype around the breakout fades. Still, prices are up more than 25% since the end of last week and, in the absence of further gains, the test will now will to keep hold of as much of this as possible to prove this was no flash spike without substance.

Regardless, it is a stark reminder of the kind of trading we saw 18 months ago, which lulled people into a false sense of security, a belief that there was lots of easy money to be made. This myth was crushed at the start of last year when it quickly became apparent that these wild moves can go in either direction and there’s no such thing as easy money.

Whatever happens, it could be an interesting couple of days or weeks in the space as we see just how much it has matured over the last 18 months, or whether it is in fact just history about to repeat itself.

Gold bulls feeling more confident

Gold continues to hover around $1,300 and the recovery in investor sentiment since Monday took some of the shine off the rally. With risk appetite in the markets still uncertain and investors potentially feeling a little vulnerable following Monday’s moves – not to mention the prospect for more tariffs – gold bulls may be feeling a little happier than they were a week or so ago.