Stock markets watching trade dispute closely

Summary:

• Trade tension remain at the fore of investors minds

• Oil rises on Saudi hints

• Aussie gains after election shock

The recent trade in equities has seen a pullback in major benchmarks from their 2019 highs with trade tensions threatening to spoil the year to date rally. News that the decision to implement auto tariffs would be delayed caused a recovery into the end of last week, but this morning we received a timely reminder that this could well get worse before it gets better. Reports that Google has barred Huawei, the world’s second biggest smartphone maker, from software updates to its operating system comes as a major blow to the Chinese company and it would not be at all surprising to see some retaliation from Beijing as this tit for tat trade war threatens to escalate further. The FTSE has made a quiet start to the new week, trading little changed around 7350 while the pound is edging higher as the currency looks to recover from it’s awful recent run lower.        

Oil rises on Saudi hints

One market that has enjoyed a bright start to the week is Oil, with Brent crude gaining over 1% after some supportive comments from Saudi Arabia. The kingdom’s energy minister al-Falih said that he was “not fooled” by the current price and thought that the market is still “fragile” in Jeddah yesterday, with the comments increasing speculation that OPEC+ will sustain output cuts at their bi-annual meeting next month. The gains saw Brent trade at its highest level since late April, but there has so far been a lack of follow through to the upside and traders may well wait for more concrete assurances before pushing the market further with the recent return of trade tensions providing a threat to global demand.    

Oil gapped higher by more than $1 on the Saudi comments, but the market has failed to break above prior resistance around 73.40. A gap fill would see the market return to 72.08. Source: xStation

Aussie gains after election shock

The best performing major currency today is the Australian dollar with both the currency and the stock market reacting positively to a dramatic election over the weekend. Exit polls had predicted a Labor Party victory, in what was another bad call from pollsters as it now seems that a conservative coalition is close to a majority. Prime Minister Scott Morrison is all but confirmed to retain his role in what amounts to a major upset. The Australian stock market surged to its highest level in 11 years overnight.