Further declines in stocks as Gold jumps higher

Summary:

• US500 falls beneath 3100 as sell-off intensifies

• Trade concerns weigh on sentiment

• GBPUSD back near $1.30

• USDZAR surges after dismal GDP report

It’s been a pretty bad couple of days for US indices with the markets trading firmly in the red on the European close after Donald Trump poured more fuel on his recently reignited trade fire. The self proclaimed Tariff man shocked investors yesterday when he announced tariffs on imports of Steel and Aluminum from Brazil and Argentina before this morning doubling down on this new offensive by suggesting that he is in no hurry to reach a deal with China and it may be better to wait until after the 2020 election next November.

Firstly, the announcement yesterday via Twitter that tariffs would be slapped on Aluminium and Steel imports from Brazil and Argentina put a cap on an early push higher for stocks. This morning comments that there is “no deadline” on the timing of a China deal and that is “probably better” to wait until after the 2020 election have caused an adverse market reaction with European stocks falling to the lowest level of the day and US futures dipping to levels not seen in a fortnight. 

The run higher seen in major benchmarks in the past few months has been built in no small part on questionable foundations with near incessant positive noises on the US-China trade front seemingly the major catalyst. However, this narrative is now being questioned once more and with less than 2 weeks until the 15% tariff increases are set to come into play there could be some increased volatility and a bumpy ride ahead.  

The risk-off move can also be observed elsewhere with bonds rising and Gold hitting the $1480 level. 

The pound has moved higher this today, once more approaching the $1.30 and trading not far from its highest level in 7 months. The gains seem to be more a function of weakness in the buck rather than strength in sterling however, with the greenback being sold back following some disappointing manufacturing data across the pond Monday afternoon. 

The Conservative lead in the polls remains around 10% on average and with just 7 days left of campaigning traders will be keeping a close eye on whether we get a repeat of 2017 and this narrows further.

USDZAR is up by almost 1% today after the data from South Africa disappointed greatly. Q3 GDP contracted by 0.6% quarterly which means than annual growth slowed to just 0.1% from 0.9% in the second quarter. South Africa has been mired in low growth since 2015 and the data expose the economy to risk of recession again. USDZAR is rebounding from 14.50 support without a tangible resistance up to 15.00.