Sino-US tensions stall market comeback

Stock markets are back in negative territory on Thursday, pulling away from their recent highs as momentum continues to fade this month.

The "sell in May and go away" mantra isn't necessarily holding true just yet but the incredible rebound we've seen since March has undoubtedly stalled this month. The prospect of economies reopening and returning to something that resembles normal has, at times, been very positive for markets, as have positive vaccine and treament trials, but it hasn't all been good news.

There's been some setbacks in countries previously lauded for their handling of the spread and results, putting more emphasis on the dreaded second wave if the exit strategy isn't handled properly.

On top of that, tensions between the US and China have increased dramatically which is making investors nervous. The prospect of relations turning south and possibly killing the painfully negotiated trade deal and even leading to new tariffs is a dreadful thought given the state of the global economy.

I think we're probably heading for more of a cold war scenario, with Trump and his team being particularly critical of the Chinese in the run up to the election in November. The last thing he needs is the finger of blame for the number of deaths in the US being pointed his way when the economy is in such a perilous position. He'll do whatever it takes to ensure this doesn't happen.

Oil marches on higher

Oil is on a relentless run and is in the green once again today. The June contract expiry passed without any drama at all, in fact the rally only accelerated, and the July contract is now closing in on $35. That level may have seemed catastrophic six months ago but now I'm sure there are many producers breathing much easier.

Given the level of production cuts at this point and the improving economic prospects, there's no reason it can't continue to climb higher, although it may soon start to lose momentum given the sheer size of the bounceback we've seen. The next big test to the upside, above $35, is $37.50 and then $40.

Gold pulls off its highs

Gold prices are pulling back again today, with a stronger dollar helping to drag gold back from its peak. It's run out of momentum quite quickly after finally breaking out of its range. The prospects for gold still look bright, although this is a little bit of a setback. Inflation is getting a lot of attention all of a sudden which could be playing into this.

The inflationary longer term risks of deglobilisation crossed with the potential deflationary risks in the near-term as we navigate through the most severe recession in a century. The latter could limit the upside for gold if it gathers momentum but the longer term, given the amount of stimulus we're seeing, continues to look bullish.

$10,000 holds for now

Bitcoin bulls may be suffering a confidence blow after repeated attempts to break the psychologically significant $10,000 barrier failed. This looks to have taken its toll, although I doubt they'll take defeat that easily. The next test to the downside is $9000, a break of which could see bitcoin testing $8,000 once again and cast real doubt over its upside potential.