US Open – Trade Date, EU Confidence, Oil, Gold, Bitcoin

US stocks will attempt to make another attempt at record highs after the US and China continue to provide positive incremental updates in the trade war.  US and Chinese negotiators have set a tentative date to meet in Washington DC on October 10th and 11th. 

With President Trump heavily focused on the impeachment proceedings and the unidentified whistle-blower, markets are expecting this long process to possibly provide added incentive to see a trade deal get done before Thanksgiving.  The politics of this whole spectacle will be very messy and right now the biggest winner is Senator Elizabeth Warren.  The base case for the impeachment proceeding will likely see House move this forward, but the Republican held Senate stand by the President.  Wall Street was not expecting much to get done by the government regardless of the political mess that is in place.       

This morning’s key US economic releases are expected to show the US consumer is softening as personal spending declines, while income rises.  The Fed’s preferred inflation gauge is also expected to rise closer to their target.  If we see softer inflation and weakness with the US consumer, we could see markets become more confident we will see the Fed cut rates for a third consecutive meeting next month. 

EU

ECB easing bets are likely to rise after the euro-area economy confidence tumbled to a four-year low.  Industrial confidence fell to a six-year low and the outlook for the entire sector looks pretty dire.  The trade war and Brexit remain headwinds for Europe and it is likely we will not see either story deliver solution before year end. 

Oil

Oil prices are off the lows that stemmed from the drop in China’s industrial profits in August, just another signal that the world’s second largest economy continues to decelerate.  Crude prices were also weighed down on news that Exxon Mobil Corp’s plan to restart oil platforms off the California coast.  This could restart 10,000 barrels of production that has been idled since 2015. 

Oil could have its worst weekly performance as a deteriorating demand outlook intensifies and after Saudi Arabia was able to recover production faster than anyone expected from the biggest attack ever on its key energy infrastructure. 

We could be near a key bottom for oil prices as tensions could heighten in the Middle East. Iran is losing all of its European support and the next card they may play is strategic attacks on oil tankers or other key energy assets. 

Gold

Gold prices slumped in early European trade after risk appetite drove all the major bourses higher.  Gold has been stuck in a tight range as a strong dollar has minimized this week’s geopolitical risk driven safe-haven demand.  Gold could breakout higher as we could see strong demand from India stem from the October 27t Diwali holiday.  With August Indian imports seeming to be lackluster, we could see strong demand leading up to the holiday. 

Bitcoin

Bitcoin seems to be finding some support as investors are reminded that the lackluster debut of Bakkt should have been expected since this futures product launch is not providing any major advantages to institutional trade flows.  The majority of the retail market already has the best liquidity, so this makes Bakkt look a little less appealing on the onset.  Bakkt will likely be adopted by institutional platforms over time, but for now there is no urgency for the big boys to take advantage of this liquidity. 

Futures brokerages are not ready to clear trading and most of the trading community do not even have access to Bakkt price feeds. This week’s weakness that stemmed from this disappointing bitcoin futures contract debut might be short-lived.

Bitcoin’s bearish breakout could get even uglier if $7,400 level does not hold.