News & Analysis

US shares fightback from sharp losses; Trade Fears spark USD buying; Bitcoin holds gap breaks higher; Gold hits new 2018 lows

Jul 3, 2018 | Daily Market Outlook

Upcoming high impact news:

14:30 AUD Cash Rate (exp hold 1.50%) RBA Rate Statement
18:30 GBP Construction PMI

Equity markets pared loses overnight the Dow Jones and S&P500 fighting back to finish in the black. At one stage the Dow traded 200 points lower. Concerns about the Trump administration’s trade policies kept a lid on gains. “Positive fundamentals are being offset, in the short term, by the fear of negative potential fall-out from the trade drama,” said Tom Essaye, founder of The Sevens Report. The Dow Jones +35.77 – The S&P500 +8.34 – The Nasdaq +57.38. Commerce Secretary Wilbur Ross doubled down on the administration’s trade efforts, stating on Monday that President Donald Trump will not change his mind even if the stock market falls sharply on trade worries.

These and other trade developments lead to sharp losses in Europe, the FTSE -89.08 – the DAX -67.83 – the EUR STOXX -22.52. Unemployment numbers in the euro area fell in May putting the jobless rate at 8.4 percent across the 19 countries. Euro area PMIs fell to an 18-month low in June on concerns over growing trade barriers. The European Union has threatened to impose new retaliatory tariffs worth $300 billion if the U.S. moves forward with penalties on European cars, the Financial Times reported. Furthermore, the White House has prepared a draft bill that allows it to unilaterally increase tariffs without the approval of Congress, Axios reported.

The ASX200 is trading 26 pts higher but most main Asian indices are trading lower today.

The continuing unease lead traders back to safe haven currencies with the USD and JPY seeing gains to the majors. The USD lead the charge closing higher to the Yen and the majors. “There’s a strong element of ‘risk off’ generated by trade concerns behind the dollar’s latest rise. That said, the dollar has managed to gain only as emerging market and commodity currencies have slid due to risk aversion,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo. So far today we’ve seen risk firmer to the USD and Yen. The AUD is performing the best as traders look towards this afternoons RBA meeting, rates are expected to be held at 1.5%, Governor Lowe hasn’t been overly hawkish in previous statements so traders will be looking to his comments in the rate statement at 2:30 pm today. Prices are off last night’s low’s but jitters remain and we are not seeing a lot of conviction from risk buyers at this point in the Asian session.

Oil continued higher overnight but failed to make a new weekly high. Libya declared force majeure on significant amounts of its supply. Rising overall output from OPEC as well as in the United States is dragging on markets. USOUSD has added 44 cents to this point in the day. $72.50 continues as short-term support. Traders keep an eye on this level. Gold failed to hold gains and plunged to new 2018 lows losing $10, sellers have been active this morning pushing price to new low’s hitting 1237.97. While USD demand continues and Gold shines away from safe-haven status we can’t see too much on the demand side right now.

Bitcoin rallied after its opening gap adding 287. Buyers breaking the longer term daily trend line. While 6310 hold we would be looking for further buyer demand. On the short-term, today 6630 is showing short-term resistance.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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