The US Dollar traded almost unchanged against other major currencies, with the US Dollar Index (USDX) closing 0.2% lower compared to Friday. Meanwhile the Turkish lira (TRY) continued to recover, closing for the 8th consecutive trading day stronger to the dollar. Following the release of the previously incarcerated American pastor in Turkey, the relationship between Turkey and the United States re noticeably improving. Previously sanctions over this issue sent the lira lower.
After most US equity indices closed lower on Monday, early on Tuesday the performance was overwhelmingly positive in the global equity futures indices markets. The tech Index NASDAQ (US Tech 100) and the Japanese Nikkei (Japan 225) index were some of the best performing indices on Tuesday morning. Meanwhile the VIX (Volatility Index), which is also seen as a ‘fear indicator gauge’, further declined from the high it reached on Thursday amidst the sell-off on the stock market.
Cryptocurrencies, especially Bitcoin saw significant volatility, while trading higher, following a sell-off in the ‘Tether’ cryptocurrency. Tether is often used by traders in the cryptocurrency market as it is supposed to be pegged to the US dollar, but now worries about credit risk increased. Meanwhile the German financial market regulator suffered a setback in court, as the court decided that Bitcoin cannot be regarded as a financial instrument and thus does not fall under certain financial market regulations.
On Tuesday in the UK Unemployment statistics for September will be released. In Germany the influential ZEW Survey will be published and the EU releases its Trade Balance for August. Italy will also release its Trades Balance for August and its most recent Consumer Price Index (CPI).
From the United States data from the Redbook Store Sales statistic, Industrial Production, capacity Utilization, American Petroleum Institute (API) crude oil stockpile statistic and the Housing Market Index are expected. Companies like Netflix (NASDAQ:NFLX), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS) and Johnson & Johnson (NYSE:JNJ) are due to release their quarterly earnings.
The pound moderately improved against the euro, as the UK continues to negotiate a Brexit deal with the EU. However the questions about the Irish border puts a significant strain on the progress, with both sides appearing to be ready to make few concession on this issue. A meeting between the British PM May and leaders of EU countries on Wednesday could be key to understanding what progress can be made in the relatively short time until the Brexit is set to happen at the end of March 2019. President of the EC, Donald Tusk cautioned that he sees the UK heading towards a disastrous no-deal Brexit, which also business leaders, especially in the automotive industry are also increasingly worried about.
On Tuesday in the UK Unemployment statistics for September will be released. In Germany the influential ZEW Survey will be published and the EU releases its Trade Balance for August. Italy will also release its Trades Balance for August, and its most recent Consumer Price Index (CPI).
Gold
Gold continued to trade stronger, after breaking a significant resistance level last Thursday. At a level of briefly above $1,230, oil traded at a new 2-1/2 months high. Other precious metal also gained on Monday, with platinum further recovering from its recent low to a new 3-months high.
Analysts believe that the sudden gain in gold prices is connected to the uncertainty of the stock market, adding demand for the safe haven precious metal.
On Tuesday in the United States data from the Redbook Store Sales statistic, Industrial Production, capacity Utilization and the Housing Market Index are expected. Also on Tuesday data of Foreign Demand for Long-Term US Securities in August will come in. A key events this week will be the release of the minutes from the FOMC September policy meeting later on Wednesday.
WTI Oil
The upside in oil prices was very limited on Monday, despite threats by Saudi Arabian officials to use their oil supply as a weapon to retaliate in case the US would levy sanctions, following the disappearance of a vocal critic of the Saudi Arabian government at their consulate in Turkey. Still many analysts do not believe in an escalation over this issue or that the Saudis would actually use oil as a weapon, as much higher oil prices could incentivize a quicker transition to alternative energy sources.
However given the start of US sanctions against the Iranian oil sector in less than a month, with now also South Korea reportedly completely ending imports from Iran, could lead to a significant tightening supply situation, whereby additional tensions in the region could have a noticeable impact.
On Tuesday the American Petroleum Institute (API) will release its crude oil stockpile statistic, followed by the Energy Information Administration (EIA) on Wednesday.
US Tech 100
With mixed economic data coming in, major US equity indices mostly closed lower on Monday. While the Empire State General Business Conditions survey level was up to 21.1 (expected 18.1), Retail Sales data clearly missed expectations with Retail Sales growth for September at +0.1% m/m (expected +0.6%), while Retail Sales not including the car industry fell by -0.1% (expected +0.4%). Also the federal budget deficit of the Treasury Department further increased by $119.1 bn. (expected $77.5 bn.) in September, due to increased spending in different sectors by the Trump Administration, including the military.
Especially tech stocks remained under pressure during trading on Monday, with Apple (NASDAQ:AAPL) (-2.15%), which is a key component of the NASDAQ (US Tech 100) closing lower. Other high market capitalization tech stocks, such as Amazon (NASDAQ:AMZN) (-1.42%), Alphabet (NASDAQ:GOOGL) (the Google holding company) (-1.66%) and the Chinese ecommerce giant Alibaba (NYSE:BABA) (-2.56%) all ended the trading day on the downside.
Regarding Apple, analysts from the investment bank Goldman Sachs warned, that the significant decline in consumer demand in China could also affect the company’s earnings, while other reports indicate that the tariffs between the US and China will also hurt the US tech industry.
The earnings season is just getting started, with some of the biggest companies disclosing their quarterly results this week. On Tuesday companies like Netflix, Morgan Stanley, Goldman Sachs and Johnson & Johnson will publish their quarterly results.
