Global stocks trade higher and bonds lower this Tuesday on hopes that calm may return to Hong Kong after Lam, the city’s chief executive, announced plans to formally withdraw the extradition bill that spark massive protests in recent weeks. In mainland China the Caixin PMI services Index beat expectations thereby reducing selling pressure on the Renminbi.
Crude oil and industrial metals trade higher while gold trades lower. This after four failed attempts to break resistance at $1550/oz. Silver and platinum’s impressive 15% outperformance against gold during the past month has for now raised concerns about a correction. The depth of which will depends on whether gold manage to stay above support at $1520/oz.
Today’s improved market conditions follows a Monday sell-off after US ISM Manufacturing dropped below 50 for the first time in three years and US and Chinese officials struggled to set a date for renewed trade talks. Sources told CNBC that President Trump wanted to double tariffs on Chinese goods last month before settling on a smaller increase. This after learning that China had formalized plans to slap duties on $75 billion in US products in response to new tariffs from Washington on September 1.
These developments helped sent both Brent crude oil and HG copper below support thereby setting up the short-covering rally triggered by today’s improved sentiment.
Crude oil remains troubled by reports that production from Opec, Russia and the U.S. all rose last month. This at a time where the strength of demand growth, due to trade war pessimism, has increasingly been called into question. Next up is the delayed until Thursday ‘Weekly Petroleum Status Report’ from the US Energy Information Administration. Surveys point to another supportive stock pile drop but overall, we remain cautious with resistance at $61.50 capping the upside for now.