Once burned, twice not shy
European stocks are off a little on Tuesday but really, all we’re seeing is investors easing their way into a potentially pivotal week, as far as 2020 is concerned.
Source – Thomson Reuters Eikon 
Sitting here in my little Brexit bubble, it cannot be understated just how huge this week’s election is for the UK. It will shape the way the country is run for year’s to come with two vastly different models on offer. All the while, a hung parliament could leave Westminster in a state of paralysis for many more months. And let’s not forget, no deal is still the default on 31 January.
It’s quite remarkable just how chilled traders are going into the election, given how many times they’ve been stung in the recent past. The break above 1.30 against the dollar last week was a further show of the very overconfidence that has been punished by a voter base that has little regard for polls and betting odds. There’s certainly no shyness among those once burned.
Then there’s the trade war. The fabled easy comprehensive agreement, turned straightforward phase one deal and now who knows. What we do know is that time is running out before the 15 December tariff deadline and this was meant to be wrapped up a month ago.
Are investors in for a merry Christmas or is a bag of coal awaiting them under the tree. The Santa rally may well hang on negotiations this week. I fear a delay to the tariffs is the best investors can hope for and don’t get me wrong, relief can be very good for markets.
Quicksand-like decline continues in gold
What is there left to say about the gold market? Well, very little at the moment. The bears remain in control, as they have for some time, but they still lack the muscle that their counterparts did during the rally. The pull back from the summer highs has been like being caught in quicksand.
The direction of travel has been clear – for much of the time at least – but progress has been painfully slow. It’s getting there though. The recent consolidation has held things up again but the outlook is unchanged. Friday’s plunge may have reinvigorated sellers and it will be interesting to see if they can pile the pressure on $1,440-1,450 support. A break of this draws the attention back to $1,400.
Gold Daily Chart
Oil awaiting trade news
Oil is looking a little flat at the start of the week. OPEC+ delivered and more last week, with Saudi Arabia committing itself to an additional 400,000 barrel cut on top of the 500,000 agreed upon between OPEC and its allies. Oil prices ended the week strongly on the back of the news, the jobs report didn’t do it any harm either.
But where does it go from here? Compliance will be the test of the deal but before that, oil traders will be gripped on the trade talks. A deal this week could give oil prices another good kick higher, potentially more so than the OPEC+ agreement, given what it means for the global economy.
For a look at all of today’s economic events, check out our economic calendar .
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