Oil buoyed by inventory and China data

Markets shrug off encouraging Chinese economic reports

It’s been a sluggish start to the trading week, with there being no lack of market headlines but rather little movement on the back of it.

Take this morning for example. We were treated to a selection of expectation-beating economic reports from the world’s second largest economy and investors simply shrugged it off like it does really matter. Except it very much does and a slowdown in China – which remains locked in a trade war with the US – has contributed to expectations of slower global growth this year.

I’m not one to get carried away with one batch of encouraging data and the longer term trend is very much against China, but these numbers may at least suggest all is not as bad as feared. And if a trade deal is struck in the coming months with the US, as many expect, perhaps things could even improve.

Oil buoyed by inventory and China data

The Chinese data may not have been the catalyst for the recent gains in oil prices – taking Brent to fresh five month highs and WTI just shy – but it may well be helping to sustain them. We haven’t seen much of a corrective move since the rally on Tuesday which suggests there may be more to come.

A surprise drawdown in inventories gave oil prices a nice boost just as people appeared to be starting to question the sustainability of the rally. What may support this view is the fact that price has barely surpassed the previous peak in Brent and it’s already stalled, while the momentum indicators aren’t particularly supportive of the bullish case.

Gold moves below $1280

An interesting move in gold on Tuesday as it broke below $1,280 in what could be a very bearish development for the yellow metal. This has long been a key level of support for gold and some weakness in the dollar this morning isn’t reviving it. That has been the case for some time that a rising dollar has an outsized impact on gold prices compared to when it declines, a key insight into sentiment towards it.

With price having finally broken below $1,280, a more significant decline could be on the cards. As yet, we haven’t moved back above $1280 – in fact, it rebounded off this level early in European hours – which suggests this is no false breakout. That could bring $1,260 into focus as the next notable support, with $1,250 and $1,240 of interest below that.