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Risk ends stronger – Stocks climb – Euro surges; Oil hits new levels not seen since 2014; Trade war issues linger.

Jul 2, 2018 | Daily Market Outlook

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US markets ended the week on a high note, but-but still posted weekly losses as the underlying market sentiment was soured by anxiety over global trade frictions. Gains were modest on the three main indexes. The Dow Jones +55.36 the S&P500 +2.06 the Nasdaq +6.62.

Nike shares jumped 11% after beating earnings expectations. The Dow was also boosted by Bank shares trading higher for most of the day after announcing buybacks and dividend hikes following the Federal Reserve’s annual stress test. “We’re clearly in a sideways market,” said Arian Vojdani, investment strategist at MV Financial. “The narrative — aside from strong economic data and good earnings — is not good.”

“Investors are sort of holding their cards to the chest because they want to see how this (trade spat) turns out,” Vojdani said

Trade worries continue to hurt investor sentiment – Axios reported on Friday, citing sources, that Trump has repeatedly told top White House officials that he wants the U.S. to withdraw from the World Trade Organization.

The ongoing trade spat between the U.S. and China has sent market volatility higher this week, with the Cboe volatility index (VIX), surging 15.6 percent.

European shares ended higher on mixed indicators, EU leaders hashed out a deal on migration, although underlying market sentiment was soured somewhat by ongoing anxiety over ongoing global trade frictions. eurozone inflation rose to its highest rate in more than a year this month as surging energy prices lifted price growth above the European Central Bank’s (ECB) target. Britain’s economic growth has been upwardly revised for the first quarter of the year after construction data beat estimates. The FTSE closed 21.20 pts higher, the DAX closed 128.77 points higher.

Oil jumped to new 2018 highs in Friday’s trade, USOUSD added 86 cents closing at 73.40. Supply continues to drive prices, U.S. sanctions against Iran threatened to remove a substantial volume of oil from world markets. OPEC and Russia have said they will raise output to meet demand, but many analysts think that the extra supply may be inadequate. A Canadian production outage disrupted the North American market.

Gold snapped a 4-day losing streak on Friday, adding over $5. A weaker USD lead the recovery but analysts still think is vulnerable. “We’re receiving only a couple of dollars bounce on the back of a pretty decent weakening of the dollar, so gold’s not showing any signs of strength,” said Ole Hansen. “There is feeling in some quarters that we may be nearing the bottom of this recent downturn (in gold),” MKS PAMP Group trader Tim Brown.

Risk currencies rebounded, the EUR jumped after European Union leaders reached an agreement on migration that eased pressure on German Chancellor Angela Merkel, but traders said the gains may be short-lived because of deep divisions within the EU. Higher euro zone inflation also helped the euro. The AUDUSD jumped adding 60 pips closing above .74. The GBPUSD added 133. In what was a solid showing from risk after a week mainly driven by declines. The Majors all increased to the Japanese Yen. The GBP EUR and AU jumped adding over 70 pips respectively.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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