Stocks fade after early gains; USD strength weighs on precious metals

Summary:

• US stocks probe key resistance on trade deal hopes

• DE30: Fresenius Medical Care sinks after Reuters report

• USD strength weighs on precious metals

• UK Construction sector < 50; Golden cross on GBPUSD

• Fed may add crypto cash to its stress tests

In what appears to be a rinse and repeat of last Monday’s session, US indices gapped higher on the open after further positive sounds on the US-China trade front over the weekend. The Wall Street Journal reported that the world’s two largest economies are in the final stage of completing a trade agreement, which could see an end to the present tariffs. The weekend before brought news that the US had extended the deadline to increase the current levies on China beyond 1st March and on both occasions the stock indices re-opened with gaps higher. However, as the day has wore on these gains have evaporated and the US500 is now down on the day after earlier failing to breach the 2815-2824 resistance once more.

There’s been similar price action seen in the Dax today, with the market trading on its lows of the day by the European cash close. Fresenius Medical (FME.DE) is one of the worst performing DAX stocks with the German company is underperforming following a Reuters report. Namely, the news agency reported that the US national healthcare schemes may start favouring home-dialysis rather than treatment carried out at clinics. In case this revelations are confirmed Fresenius Medical may be in trouble as it operates dialysis clinics and generates around 70% of its sales in the North America.

It’s been a strong start to the week for the US dollar, with the buck rising against all but 1 other currency today despite an attempted verbal intervention from US president Trump over the weekend. Speaking in Maryland, Trump repeated his criticism of Fed policy and bemoaned the strong US dollar by describing chair Powell as a "gentleman that likes raising interest rates in the Fed, we have a gentleman that loves quantitative tightening in the Fed, and we have a gentleman that likes a very strong US dollar". Gold has fallen to its lowest level since January while Platinum has swooned and is down by more than 2% on the day.

According to the latest survey amongst purchasing managers, the outlook for the construction sector is rather bleak, with the PMI reading for February coming in worse than expected and at its lowest level in almost a year. The decline was also larger than consensus forecasts, while a reading of 49.5 means that this indicator has once more slipped in contraction territory below the 50 handle. The fall last March was attributed to unseasonably late snowfall, but this time no such excuses can be rolled out, with the main reasons for this latest drop being sharp falls in both commercial building activity and civil engineering.

The weekend was not so successful for the cryptocurrency market as major virtual currencies experienced some drops. Monday’s trading has not also seemed to be rosy. Moreover, the largest digital currency Bitcoin hit its two-week low during today’s trading. According to CoinMarketCap, the capitalization of whole crypto market stands a little below the $127 billion handle whereas Bitcoin accounts for roughly 52.4% of this value on Monday morning. On Thursday the Board of Governors of Federal Reserve published a document titled “Amendments to Policy Statement on the Scenario Design Framework for Stress Testing” in which it is said that a crypto crash could be a crucial market risk. According to the Fed’s document, the commented proposed to the Board to include “extraordinary shocks, such as a war with North Korea, the collapse of the Bitcoin market, or major losses caused by trader misconduct” in its stress test scenarios. “Where appropriate, the Board intends to continue augmenting the scenarios with risks it considers to be salient”, as we could read in the mentioned publication.