Equity market
Equity markets and risk asset, in general, are on the move as stimulus hopes spring eternal. While the definite trade overtones from President Trump have sheltered risk markets from the usual maniacal Monday's, we've become far too accustomed to waking up for.
Indeed even a return to the fragile state of G-20 trade war neutrality combined with sturdy Fed and Pboc policy backstops, it could provide a significant springboard for risk assets.
But after last week’s roller coaster ride dominated by risk-off mood, there's a large part of the market that needs more convincing suggesting the current uptick in risk sentiment might not be supportive enough to revert the constant overlay of unfavorable equity market views.
Oil
Oil is up this morning following a drone attack on facilities at the Shaybah field in Saudi Arabia but extended gains at the London open riding the wave of trade talk optimism, and the latest Pboc stimulus efforts, both of which offset the increase in the US rig count announced on Friday.
Given the lukewarm buy in’s to middle east risk premiums recently, this current rally is shaping up to be more about optimism on US-China trade than a heightened awareness of supply risks, which should make traders nervous owning risk at daily tops given Trump's penchant to influence trade negotiations via his Twitter account.
While the trade overhang remains in place, oil prices will remain hostage to headline risk.
Gold
Gold remains at the epicentre of risk markets intersected by the two major Macro themes, trade war risk and the race the bottom on global yield.
The problem for the gold market this week is that the stimulus discussions could centre around the melding of fiscal and monetary policy which is a far more sensible and pragmatic approach free from the melodrama that QE inflames and not as bullish for Gold markets in my view.
Fast money started to get involved as downside momentum was building through the Asia session, suggesting we could see a deeper correction in the market today. And today's position cleansing will definitely test the markets bullish conviction.
Given the policy uncertainties that may or may not unfold later in the week from Jackson Hole symposium, Gold could consolidate with a downward bias before eventually resuming its upward momentum, a sturdy build in positioning notwithstanding, for no other reason that every central bank in the world remains in contention for the Yellow Jersey in the race to zero.