Pre-Market: Stocks Stage Relief Rally amid Trade Uncertainty
Financial markets are taking a breather after last week’s tumultuous days, with global stocks inching higher across the board in European trading. The week started on a negative note in Asian trading, but risk assets rebounded later on, and the major US indices opened in the green, and the wounded European markets are also holding on the modest gains after a bearish week.
DAX Index, 4-Hour Chart Analysis
The DAX recovered above the 12,000 level thanks to the weak global relief rally, and with the short-term momentum indicators being clearly oversold, the German index could be in for a more meaningful correction in the coming days. That said, the broader picture looks negative, and a break below the March low near 11,725 would be a huge blow for risk assets.
Dow 30 Futures, 4-Hour Chart Analysis
The Dow has been performing relatively well among the US benchmarks last week, and thanks to the focus on the second round of tax cuts that Republicans are planning to move forward with this week, the mega-cap index could continue to shine. The industrial average is still below the January highs, as it was relatively weak all summer, but now a rally to new highs is a realistic scenario, with the record high being only 2% above the current level.
Shanghai Composite, 4-Hour Chart Analysis
Donald Trump managed to shock markets yet again on Friday, talking about the possibility of yet another round of tariffs on a staggering $267 billion of Chinese products. While the previous $200 billion is yet to be enacted, the new “package” would mean that almost all Chinese products would be under the new tariff regime, even though no additional information is available at this point.
Chinese stocks continue to suffer under the economic and trade pressures, and with the bear market low being just below the current level of the Shanghai Composite, technicals suggest more pain fo fore country’s assets.
Emerging market stocks broke a seven-day losing streak on Friday, but despite the slight bounce the segment remains the biggest global risk factor, and given the new highs is US short-term yields, the situation could get worse in the coming period. The funding crisis in the most vulnerable countries could continue, even as the Dollar is lagging the trend in Treasury yields currently, and forex markets are much calmer than in recent weeks.
Pound Rallies on Renewed Brexit Optimism
GBP/USD, 4-Hour Chart Analysis
While the major currencies are mostly little changed compared to Friday’s price levels, the great British Pound is rallying against all of its peers, as an EU official hinted on a Brexit deal in the near future. The Pound formed a choppy consolidation pattern after being hammered lower in recent months against the USD, but the volatile correction still failed to change the underlying trend, and the pair remains stuck in a broader declining channel. The next couple of weeks will be crucial for the Dollar and its main peers, as the major central banks will all hold monetary meetings, and as the fate of the Dollar’s recent correction will likely be decided.
Copper, 4-Hour Chart Analysis
Commodities are broadly higher today thanks to the Dollar’s weakness, and gold, copper, and oil futures are all slightly in the green. Copper is still drawing global attention, since the industrial metal continues to trade near its recent lows, signaling troubles ahead for the global economy. The metal settled down last week, just above the low near $2.56, and for now, a breakdown to a new 15-month low seems very likely, and that could point to further pressure on emerging markets, and especially China.
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