Crude oil prices shed around 3% overnight as concerns rose over the lack of news on a trade agreement between China and the US. Traders anticipate a fourth weekly increase in US oil inventories - clear evidence of dwindling demand. Bond yields fell again. However share markets defied the fear and largely maintained higher levels.
US President Trump reportedly told a cabinet meeting that he will raise tariffs against China unless they agree a trade deal to his liking. Whether this is a statement of intent, an attempt to pressure negotiations or a political message for domestic consumption is unclear. Regardless, the absence of any substantial progress is weighing on the global growth outlook.
Currency markets held their breath. The US dollar declined slightly against the Japanese Yen, but fell modestly against the Euro, leaving the Dollar Index virtually unchanged. Despite the fall in oil prices, a lift in important industrial metals appeared to support commodity currencies.
Asia Pacific markets are looking at weaker openings after futures fell overnight. Trade data in Japan and a People’s Bank of China decision on longer-term loan rates could shape trading ahead of tonight’s release of the US FOMC meeting minutes.
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