European open – Trade, Hong Kong, UK, gold, oil

Stocks flat despite trade talks

European stocks are expected to kick off a new week a little flat on Monday, with more talks between the US and China failing to excite investors in the way they have been recently.

Source – Thomson Reuters Eikon

The Chinese Ministry of Commerce claims a phone call took place over the weekend between Chinese Vice Premier Liu He, US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer to discuss core concerns that stand in the way of a phase one deal being signed off.

While this is arguably a positive conversation that enables a deal to be reached, we were meant to be at the point of agreeing a date and location for it to be signed off. Trump looks to have been a little premature in his assertion that a deal is done last month with there clearly still being plenty more work to do.

It always seemed a little odd how one sided the deal looked, with the Chinese clearly expected a greater commitment from the US side of tariff rollbacks, which is one issue that seems to be holding things up. This could well go on beyond the end of the year and even fall apart altogether which could be troublesome for the markets which have already invested so heavily into it.

More clashes in Hong Kong

More Hong Kong protests over the weekend will likely leave investors in the region on edge. The stand-off between the protesters and the police has become increasingly violent this last couple of weeks and, worryingly, it’s difficult to see how this ends without further clashes and bloodshed.

At this point, the economy is the least of the concerns for both residents and observers. But a place once viewed as being stable and peaceful is looking increasingly less appealing for investors who may continue to pull cash out the longer this goes on and more fierce it becomes.

UK campaigning farce continues

In the UK, the election campaigning continues although neither of the two major parties is yet to release a manifesto, leaving the rest of us to feed off various reports and releases. The leaders of the two main parties will face off against each other for the first time on Tuesday, but in the absence of manifesto’s what exactly will they be debating.

If the last week or two is anything to go by, we can probably expect plenty of greatly exaggerated or even false claims about what the other party will do and just how disastrous it will be for the country and the economy. Brexit will likely feature prominently, although neither side will want to discuss it in any real detail.

Gold may take another run at $1,480

Gold is edging lower in early trade having fallen short of $1,480 last week. This would have been a major test for the yellow metal and one that could still come, with prices hardly tumbling. Near-term support could be found around $,1460 if we’re going to see another run at $1,480 although in the longer-term, the path of least resistance appears to be to the downside. Gold found some support around $1,445 last week but further declines may be on the cards.

Gold Daily Chart

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Oil losing momentum at key resistance

Oil is a tad softer at the start of the week, which further supports the idea that traders are taking weekend trade talks with a pinch of salt. A nice change considering how sensitive investors have been to them over the last couple of weeks. It also comes off a decent rally on Friday as stock markets ended the week strongly, taking Brent back towards $64. The challenge for oil now is momentum, which appears to be heading in the reverse direction to price. Not a healthy sign when you’re already trading at elevated levels around notable resistance.

Brent Daily Chart

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam