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Stocks called higher on US-China trade hopes, Hong Kong events help too

Stocks called higher on US-China trade hopes, Hong Kong events help too

Global equity markets pushed higher yesterday as a feeling of optimism circulated around the globe. 

The enormous move to the upside in Hong Kong spread around the world. Carrie Lam, the chief executive of Hong Kong, called for the withdrawal of the extradition bill, and that set the tone for the markets yesterday.

European and US equity markets finished higher as there was some positive news for a change. The Hang Seng closed up nearly 4%, and the bullish sentiment rippled out around the world. At the height of the unrest in Hong Kong, President Trump warned Beijing they should handle the situation in a ‘humane’ way, so the cooling of tensions in Hong Kong could help with the trade dispute between the US and China.  

It was announced overnight that US and Chinese delegates will meet in October to discuss trade. Combined with the developments in Hong Kong, it helped the positive outlook in Asia. US equity index futures have been given a boost, and European stock markets are called high too. The news came from China’s ministry of commerce, but a US representative confirmed the phone call, but not the October meeting, so the positive move might be on hollow ground.  

Sterling soared yesterday in tandem with the chaos of UK politics. MPs voted in favour of delaying the UK’s exit from the EU, and to make matters worse for Prime Minister Johnson, law makers voted against holding a snap general election. Amid the madness of British politics, the pound rallied on the news, as the possibility of a no-deal Brexit has been pushed back in the near term.

To a lesser extent the broadly positive services PMI data from China and the eurozone helped shape the positive mood yesterday. Earlier this week we saw largely poor manufacturing readings from the major economies of the currency bloc, and as we saw yesterday, the services sector in the region is in rude health, and that added to the optimistic sentiment.

Gold gained ground yesterday on the back of a sharp drop in the US dollar. The metal has typically moved higher on the back of a softer US dollar, but the positive move in stocks points to a risk-on attitude, and that acted as a cap to gold’s positive move.

At 7am (UK time) Germany will post the industrial orders report and economists are expecting a decline of 1.5%, which would be a sharp decline from the 2.5% growth registered in the previous update.

The US will reveal a couple of jobs reports today. The ADP employment report and the jobless claims report will be announced at 1.15pm (UK time) and 1.30pm (UK time), and economists are expecting 149,000 and 215,000 respectively.

At 3pm the US factory orders update will be announced and dealers are expectinga reading of 1%, and the ISM non-manufacturing report will be posted at the same time, and dealers are expecting 53.3.

The energy information report will be posted at 4pm (UK time), and oil stockpiles are tipped to fall 2.48 million barrels, and gasoline inventories are expected to fall by 1.52 million barrels.      

EUR/USD – remains in the wider down trend of 2019, and if the bearish moves continues it might target the 1.0900 area. A move back through 1.1000, might pave the way for 1.1164 to be retested.

GBP/USD – Tuesday’s daily candle has the potential to be a hammer, and a break above the 1.2200 area might bring 1.2309 into play. Support might be found at 1.1900, should the wider bearish move continue.    

EUR/GBP – the weekly candle from mid-August appears to be a bearish reversal, and if the downward move continues it might target 0.8872. A rebound in the currency pair might bring 0.9200 into play.

USD/JPY – rebounded last week, and a break above the 107.00 area, might bring 108.47 (100-day moving average) into play. Should the wider downtrend continue it might retest the 104.50 area.  


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