Summary:
- CHNComp down on Trump’s comments on trade
- Gold unmoved by Texas shooting
- SPA35 struggling amid Puidgemont extradition probe
It was an intensive weekend albeit not entirely in a positive way. Another mass shooting in the US is on everyone’s mind but it had no visible impact on the markets. Investors are tracking Donald Trump’s visit to Asia and his comments on trade have already had an impact on the markets. In Europe, ex Catalonia PM handed himself to the Belgian police as the Spanish government seeks his arrest.
Donald Trump clearly has two priorities during his trip to Asia: North Korea and trade. Even though the trip started in Japan, Trump has already applied a serious pressure on China, arguing that the country needed to do much better on North Korea. However, it were his remarks on trade that affected markets as he said the US could take action on trade disparity with China “very soon”. Despite generally solid US-Japan relationship he did not spare Japan either, stressing that sides need to find way to narrow down the deficit. As a result the Chinese market tumbled by as much as 2% at one point although this sell off was short lived as markets were able to recover majority of the losses. Indeed, when we take a look at the CHNComp (Hang Seng CE) we can see that the bulls were able to defend the 11400 level with a long wick and they still have a shot a making fresh highs.
CHNComp managed to erase most of the losses following Trump’s comments. Source: xStation5
A horrible shooting that left 26 dead took place in Texas where a right to posses a weapon is a fundamental thing to many and certainly it will spark a discussion over plans to limit access. As tragic as the event was, it had no impact on the markets with gold prices barely changed today in the morning and EURUSD stuck to 1.16. Let us recall that both inched higher on Friday just after the NFP release (as wage growth disappointed at just +2.4% y/y) but reversed lower again after more than solid ISM from the services sector. One could see that gold prices ignored a recovery on bonds last week but looking at their mid-term relationship they are still above the “fair” level and could very well crack through the 1265 support if yields are on the rise again.
Gold prices look vulnerable above a support of 1265. Source: xStation5
Finally, the Spanish SPA35 is struggling again at the European opening following a major sell off on Friday after Carles Puigdemont surrendered to Belgian police as the Spanish government seeks his extradition. Markets are concerned because polls ahead of elections (planned for 21 December) shows a close result between secessionists and pro-Spain parties. The latter still hold a tiny advantage (when their results are combined) but the gap is too small to make any valid predictions and investors could be concerned that harsh actions against Catalonia politicians could sway elections results towards separatists.