Dinner for two, please
Amidst the trade war headline frenzy and fading optimism regarding the Trump-Xi meeting is a stark reminder that no one, friend or foe, is spared the wrath of President Trump when it comes to his America first policies. Indeed, the president's propensity to generate marking moving headlines kept investors walking on eggshells even more so when he called out General Motors (NYSE:GM) for their decision to close some US plants.
But despite risk assets wobbling across the board overnight, the S&P 500 did advance for the second day in a row after White House economic advisor Kudlow says Presidents Xi and Trump will meet for dinner on Saturday, December 1, on the sidelines of the G20 meeting. However, something tells me humble pie will not be on the dessert menu.
But overall storm-tossed price action across all assets highlighted investors nervousness around the Xi-Trump event. US automotive and technology stocks traded heavy on fears of more US-imposed tariffs, while Kudlow and China advisor Liu, were quick to support their leadership mandates.
Fedspeak
Fedspeak did take the back seat to a looming trade crisis, but Clarida did appeal to dispel the markets dovish notion from last weeks speech, but ultimately Fed policy will revolve around data dependency. Bullard, Bostic, Evans and George – were largely ignored as the market pivots to Chair Powell’s upcoming speech Wednesday. But overall the US dollar continues to hold a decent bid on haven demand and further buttresses by more clarity on the Fed narrative.
Oil Markets
The market opinions have shifted from surging Saudi oil production and President Trump’s ongoing vocal support for lower prices although the market remains wary over President Trump’s grip on the Saudi decision-makers in the wake of the Khashoggi murder. Notwithstanding, with the Russians in wait-and-see mode, there remains a high level of uncertainty.
Traders are doggedly focused on the upcoming G20 meeting, and subsequently, the December 6 OPEC meeting and are providing a counterpoise to the bearish elements in the markets as a cut of 1.0 mmbpd remains a generalized consensus expectation at this point.
This week’s API inventory data is taking a back seat to the more significant production cut narrative, and predictably the markets had a very muted reaction to a larger than expected inventory build as prices have held relatively steady but did trigger some mild profit taking none the less.
Gold Markets
Gold remains a USD driven storyline very much. And while the risk of equity market drawdowns, to favour gold buying on the dips and for geopolitical tail hedges. But the strong dollar narrative that is unfolding into year end and possibly beyond is providing a significant headwind for prices.
US equities survived the wrath of Trump headline onslaught while Fed Clarida presented a more balanced interpretation of Fed policy overnight and if anything, the market is viewing his comments with a hawkish glint.
A negative session for Gold overnight
The Malaysian Ringgit
The market remains very much in neutral awaiting some on the Xi-Trump meeting. With headline risk dominating the landscape it doesn’t make much sense taking a view based on the headline roulette wheel.