Today’s Key Market Drivers: 30th May 2019
US Bond Yields suggest the market is getting bearish.
US bond yields continued to decline on Wednesday signalling that traders are becoming increasingly worried about an escalation in the current trade war with China. Business sentiment is now being impacted and whilst it is too early to gauge the economic impact the tariffs are having on both countries the market’s reaction is to continue to remain cautious and rather bearish with the S&P 500 falling another 0.69%. 7 out of the last 9 trading days have been down days.
The S&P 500 has now touched and bounced off the 200 EMA on the daily chart and this may give traders a reason to try and bounce this market back higher before the weekend.
Stocks are falling more than the safe haven currencies are rising.
The market’s reaction when stocks fall is to usually buy the safe haven currencies but the Yen and Swiss Franc have so far struggled to receive their usual flow of money when stock markets hit the skids. In a strange twist, US bond yields are falling; US stocks are falling but the USD v JPY is rising which is unusual in my experience. With 7 of the last 9 trading days negative for stocks, I would ordinarily expect to see the safe haven currencies such as the Yen and Swiss Franc dominating but this hasn’t been the case.
So, what can we take away from the unusual price movement? I simply put it down to the market is a little confused. I am not going to waste my time today trying to figure out something that will sort itself out over coming days. We all get confused from time to time and the financial markets are driven by humans after all.
China is now officially pissed off.
Was Trump’s friendly visit to Japan and comments about the Japanese trade deal meant to piss the Chinese off? Who knows, but one thing is for sure they aren’t happy and on Wednesday a state-run Newspaper said China could use rare earths to strike back in a trade war with the United States Reuters reports.
“President Xi Jinping’s visit to a rare earths plant last week had sparked speculation that China would use its dominant position as an exporter of rare earths to the United States as leverage in the trade war. Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment. The prospect that their value could soar as a result of the trade war caused sharp increases in the share prices of producers, including the company visited by Xi.”
Bank of Canada signals that rates won’t be going anywhere.
The Canadian Dollar briefly spiked lower following the Central Banks May statement which showed the cash rate being left at 1.75% and a rather dovish tone from Governor Poloz in the statement. Whilst acknowledging growth has recently picked back up the BOC left the cash rate unchanged and warned there is increasing risks to the economy if global trade tensions continue to gather pace.
In other news.
The Euro remains under pressure following weaker than expected German unemployment numbers. New Zealand’s Financial Stability Report came and went without a whimper.
The Aussie Dollar has Private Capital Expenditure and Building Approvals numbers to get over today which is set down for release at 11.30am AEST.
The big news on Thursday will be the first quarter US GDP which is expected to show the US economy grew at 0.9% in the first quarter or 3.1% annualised. If this number can exceed the markets estimates it may go a long way to alleviating the current stress the market is creating about a US economic slowdown.
The market is due for a bounce and if the US GDP number today is positive, I suspect Thursday’s US trading session will once again see the buyers dominate.
A lack of focus leads to a lack of profit.
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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