US stocks were mixed overnight after similar trading in Chinese stock markets yesterday. The probability of more rate rises in the US is higher and so is the chance of the PBOC lowering their reserve ratio again.
The two countries might be on two opposite monetary policy paths but investor sentiment could be alike as trade tensions continued to undermine investor confidence. The overnight market action suggests it is more difficult for global investors to find their focus ahead of major US earnings report in October. A single catalyst may be all it needs to spark the next trend in the financial markets.
The International Monetary fund downgraded its forecast for global economic growth in 2018 to 3.7% from 3.9% in their previous estimation. The tension of trade wars may be to blame but the instability around emerging markets rubbed salt into the wounds. However, China imposed a new measure to cushion the impact from the current trade disputes. China will raise its export tax rebate on 1 November and aim to make the payment more promptly. The determination shown in recent government policy may help to stabilize stocks in China today, after recent losses. New yuan loans and money supply data due this afternoon may influence local investor thinking.
Gold prices and the US dollar were relatively stable overnight. Most major currencies gained but the Euro slid. The British Pound rose ahead of UK GDP and Industrial Production data due tonight. Oil prices edged higher as Iran’s crude exports fell further in October to 1.1 million barrels per day (bpd) from 2.5 million bpd in April. The rally was also supported by supply distortion in the Gulf of Mexico due to Hurricane Michael. Natural disasters may be temporary but the incoming US sanctions on Iran and potential supply issue from the OPEC nations may affect investor behaviour in the longer term.