News & Analysis

Stocks Surge as President Xi clams trade war fears; Oil posts best one rally of 2018; JPY flattened – USDCAD at 4-week lows

Apr 11, 2018 | Daily Market Outlook

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US markets – held rallies overnight after fading in the last hour of trade on Monday. Chinese President Xi’s speech set the tone early in the day giving indication China will not play an active part in starting a trade war. Chinese President Xi Jinping discussed plans Tuesday to further open up the country’s economy, with measures including lowering import tariffs on autos, enforcing legal intellectual property of foreign groups and reducing duties on other consumer products. “If you look at President Xi’s speech, it was conciliatory and that feels like a de-escalation,” said Art Hogan, chief market strategist at B. Riley FBR. “That’s what the market wants.” Index futures began their rallies early in the day and held gains through the US session. The Dow Jones jumped by 428.90, the S&P500 added 43.71 and the NASDAQ surged 143.96 pts higher.

In other news, Facebook shares surged by more than 4% as CEO Mark Zuckerberg testified in front of Congress following news that Cambridge Analytica was able to access the private data of millions of users without their consent. Zuckerberg said the company did not notify the Federal Trade Commission about the leak, noting: “We considered it a closed case.” Data news the US PPI came in better than expected at 0.3% beating 0.1% expectations.

European markets – jumped following the de-escalation of a possible trade war. Basic resources stocks ÔÇö with their heavy exposure to China ÔÇö rallied in afternoon trade to close up nearly 2.7 percent after China’s President Xi Jinping sought to soothe investor concerns about the prospect of a full-scale trade war between China and the U.S. Shares in French luxury conglomerate LVMH closed nearly 5 percent higher after hitting fresh highs earlier in the session. The autos sector also performed well, closing up 1.9 percent. Porsche and Volkswagen led the way, both ending trade up around 4.5 percent. Xi’s proposals included lowering tariffs on car imports. The FTSE closed 72 pts higher, the DAX added 135.57 and the CAC closed 44.17 pts higher.

Oil – posted its best one day rally for 2018 so far adding 222 cents to close back above $65 per barrel. China promises to open economy further, cut import tariffs. Oil prices generally helped by OPEC-led supply restraint. “Today’s monthly report from the EIA is likely to confirm that the supply situation is set to ease, primarily on the back of growing non-OPEC production,” Commerzbank said in a note. “It is doubtful whether this will pressure the price, however, as the most recent price drivers were for the most part not fundamental in nature.” Looking at the Daily chart price is closing in on two resistance areas. Overall we can see an ascending triangle pattern with a bull channel still in play.

Forex – was about risk /yesterday and last night as the USD and JPY were sold off. The GBP and EUR made strong gains to the USD and JPY. The EURJPY closing back above 132.00, the GBPJPY moving back above 151.00. President Xi gave the AUD a real shot in the arm as it surged to the USD and JPY. The AUDJPY broke back above 83.00, the AUDUSD jumped back above .7750. The A/$ has some resistance to deal with now from .7770. The CAD surged on the back of oils rebound. The USDCAD falling to 4-week lows dropping 160 pips this week. The USDJPY added 46 pips, the Japanese Yen took the title of weakest currency yesterday. Gold added $3.45 gaining to a weaker USD.

Gold – 4H, buyers are facing some extended resistance with a squeezing on the current trend. Continued fails to break 1340 -1342.50 could be suggesting buyers are running out of numbers.

Good trading from Eightcap.

Sources; CNBC. All times are AEST

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