Gold and bonds lifted overnight as rising US Covid-19 infections put a brake on the growth rally. The slide in sentiment defied stronger China trade and German industrial production data. Sentiment may deteriorate further over the Asia Pacific session if Beijing responds to the fresh US sanctioning of National Peoples’ Congress officials over developments in Hong Kong.
Stocks slid in Europe and the US. The exception were the UK and US tech stocks. The relative strength in UK stocks suggests investors are still comfortable with a “no-deal” Brexit, after news emerged of sticking points in the negotiations. In the US buyers appeared to revert to their favourite tech stocks, lifting the Nasdaq into the green despite a negative night for the Dow and SPX indices.
A modest gain in the US dollar seemed to weigh on commodities and related currencies. Crude oil prices slid, with demand fears magnifying any currency effects. Copper and aluminium slid in both London and Chicago, although iron ore prices continued their stellar run higher.
Surprising strength in gold may sound a warning to other markets. The spot price traded through an almost $50 per ounce range, lifting above $1,850 in a clear shorter term uptrend. This could signal a shift in market thinking from vaccine optimism to concern about a potential overwhelming of US health services as infections and deaths set new daily records.
