A slow start to the trading week saw the European bourses trade mixed as the rally sparked by optimism on the trade front starts to run out of steam and as US equities and bond markets are closed today. Over the weekend, President Trump received the Commerce Department’s 9-month probe on whether imported vehicles pose a national security threat. President Trump now has 90 days to decide if he wants to go after European automakers with tariffs. The next trade war is just around the corner and the general consensus is that Trump will wait until he is further along with the China trade war before ramping things up against Europe.
- USD- Quiet amid President’s Day
- Walmart – Strong earnings could ease concerns of that terrible December retails sales number
- GOLD – Weaker dollar the key for the next move higher
- OIL – Supply disruptions and soft dollar keep rally going
USD
The dollar was mixed against its major trading partners as US equities and bond markets were closed in observance of President’s Day. The bar has been set pretty high for China and the US to reach a framework agreement before the March 1st deadline. This week talks come back to DC and need to deliver further progress on intellectual property rights, forced technology transfer, Made in China 2025 plan, and how they will verify and enforce any agreement. The potential letdown on lack of detail could slow down the global equity and rally and stall the recent fall in the dollar.
Walmart
The retail giant’s earnings results will be closely watched to tomorrow. Walmart could show that the retail market was not as terrible as last week’s retail sales number suggested. Walmart shares have been fairly bid and is nearing the formation of an inverted head and shoulders pattern. Gross margins are expected to be pressured as increasing costs, and labor cost are to grow as they continue to fight attracting customers with Amazon.
Gold
The precious yellow metal’s gains are mainly from weaker dollar movement, which has stemmed from both the Fed’s pivot to keep rates on hold for the formidable future and global growth slowdown concerns. Optimism on the trade front may continue to help risk appetite across the board and could help bring the dollar down.
Oil
Crude prices opened higher to start of trading week as a supply disruption from Saudi Arabia’s biggest offshore oilfield is tightening supplies for heavy crude. Oil’s recent rally has been driven by the weaker dollar and the significant optimism the trade war may be ending soon. While a trade deal is expected, oil’s gains may be capped as growing production from the US will keep the supply side argument in place.
