News & Analysis

U.S. Canada fail to make agreement – Tech supports stocks; USD and JPY jump to risk on trade worries

Sep 3, 2018 | Market Updates

Upcoming high impact news:

11:30 AUD Retail Sales
15:40 JPY BOJ Gov Kuroda Speaks
18:30 GBP Manufacturing PMI
Labor Day Bank Holiday – USA and Canada

Stocks finished August mixed on Friday with small gains in the U.S and falls in Europe. U.S stocks edged higher after negative starts. Buy confidence continues to monitor ongoing trade situations. The U.S and Canada failed to meet a trade agreement on Friday.

Representatives from Canada and the U.S. continue to work to devise an alternative deal to NAFTA. However, Canadian trade negotiator Chrystia Freeland said Friday that “we’re not there yet.” Stocks hit session lows after a report published off-record comments made by Trump concerning any future pact with Canada: “it’s going to be so insulting they’re not going to be able to make a deal.”

Tech lifted the broader market as Amazon and Apple each added over 5%. The Nasdaq closed 21.17 higher. The S&P500 added 0.39 pts and the Dow Jones closed 22.10 pts lower. Despite the flat finish, August was a solid month for the S&P500 gaining 2.1% and the Nasdaq had its best August 2000 adding 5.7%.

Stocks in Europe finished the month on a low, trade worries between the U.S and majors partners kept buyer confidence to a minimum. Ongoing Brexit concerns continued to bubble away contributing to lower confidence over on the FTSE, price ended the session 83.61 pts lower. The DAX dropped 130.18 pts and the Euro Stoxx 50 dropped 40.52. The Auto sector was Friday’s worst performer, which continues to be affected by trade uncertainty, it finished 1.5% lower on Friday after President Donald Trump reportedly said the European Union’s proposal to eliminate auto tariffs was “not good enough.” The U.S. president also told Bloomberg on Thursday that the bloc’s trading policies were “almost as bad as China.”.

Oil dipped on Friday, but falling Venezuelan output and looming U.S. sanctions on Iran are supporting prices. Looking at USOUSD price finished 20 cents lower but finished higher for the Month of August with a gain of $2.43. We’re looking at $69 to continue as short-term support.

Gold rallied during the London session breaking Thursday’s high only to see an NY session fade. Price closing flat to slightly higher. This morning sellers have continued from Friday price trading back below 1200. A close below 1200 sets up bearish short-term bias.

The USD finished AUG on a high as trade concerns continued to drive buyers away from risk currencies. The AUD took another beating losing 67 pips, the EUR and GBP also fell as uncertainty grew.  Shaun Osborne, chief FX strategist, at Scotiabank said the markets have a “distinct risk-off look” the day after Trump’s comments. “President Trump’s pronouncements on Bloomberg late yesterday, which are critical of the…EU, willing to move on Chinese tariff…are adding to market concerns broadly,” he said

The EUR AUD and GBP fell to the Yen, making it 2-in a row. Over the weekend the Banndof Japan confirmed what was widely expected, rates won’t be increasing for a while.  This morning, risk continues to trade soft with opening gaps lower for the GBP to the USD and JPY comments from Michel Barnier look to have hurt the GBP. AUD traders will be looking to this morning’s Retail Sales data at 11:30 am.

Local and Asian shares are trading mixed with slight gains on the ASX200 +3.10 and loses on the Nikkei -80. This evening’s trade volume will be lower as U.S and Canadian markets observe the Labor Day holiday.

Good Trading from Eightcap

Sources; CNBC – All times are AEST

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