A bit of fear across markets as G20 summit kicks off

Summary:

• Asian equities retreat, gold gains and US Treasuries move up in anticipation of a pivotal Xi-Trump meeting
• Trump claims there is no time pressure to deal with Iran, the country threatens to pull out of the nuclear treaty, as WSJ reports
• Japanese industrial production bounces back in May, inflation in Tokyo remains subdued

Preparing for Xi-Trump meeting

Friday’s trading in Asia has brought some nervousness as equity indices have retreated, gold prices have moved up while the US 10Y bond yield has come back again toward 2%. These is a classic risk-off reaction as investors are gearing up for a pivotal meeting between Xi Jinping and Donald Trump on Saturday during the G20 summit in Osaka, Japan. Lack of appetite for risk has also been seen in the currency market where both JPY and CHF are trading marginally higher against the greenback. However, moves in the FX market are subdued in general. Over Asian hours trading we got a meeting between Xi Jinping and Afrian leader in which Chinese President condemned protectionism as well as “bullying practices”. Beyond that we have yet to be offered any material comments except kind diplomatic words. There is no doubt that the culminating point will be the Trump-Xi meeting tomorrow. Therefore, we do not expect too much before the weekend. On the other hand, let us recall that the US and China have reportedly agreed to a truce and details of such an agreement are expected to be revealed before the above-mentioned meeting. Thus, in theory those details may be published on Friday when markets are open letting them digest new information.

Gold prices have moved higher during Asian hours trading but they have made a small step back since then after touching the short-term bearish trend line. Note that some support could be found nearby $1414 when the 23.6% retracement of the latest rally is localized. Source: xStation5

No time pressure

According to US President Donald Trump there is absolutely no time pressure in dealing with Iran. At the G20 summit in Osaka Trump said that they had a lot of time to negotiate. Let us note that geopolitical tensions between the two countries have intensified in recent weeks after the US accused Iran of attacking a Japanese tanker earlier this month. Moreover, an American drone was shot down by Iran last week and Trump ultimately backed away from his plans of airstrikes. Meanwhile, Iran has reportedly threatened to pull out of the 2015 nuke agreement, according to the Wall Street Journal. The country also failed to inform on Thursday whether it had exceeded the cap on stockpiles of low-grade uranium. In response to these revelations oil prices are trading slightly lower this morning. However, keep in mind that they can also be under the influence of the upcoming OPEC meeting kicking off in Vienna on Monday.

Brent oil prices are approaching the important resistance in the form of the two DMAs. Source: xStation5

In the other news:

• Japanese industrial production rose 2.3% MoM in May, the jobless rate stayed at 2.4%, the job-to-applicant ratio ticked down to 1.62 from 1.63; inflation in Tokyo stayed at 1.1% YoY in June

• Australian private sector credit grew 0.2% MoM in May