European markets and US futures are trading lower because the German industrial has fallen off the cliff today. It reported a reading of -1.5 percent, an ugly number. This was well below the expectations of -0.5 percent while the previous reading was at 0.1 percent. All of this confirms that the ECB’s ammunition doesn’t have any power. Germany is the biggest economy of the eurozone and the last thing investors want to see is that the economic engine of the eurozone is coming to halt.
Today’s economic number has the trade war stamp all over it. We all know that there is no resolution insight about the ongoing trade war between the US and China. This means that the ECB will have to dig really deep into its bag to bring some powerful other nuclear weapon out which they do not have.
European Stock’s Volatility Surged by 60%
The volatility gauge for the European STOXX has surged during the past few days. To put things in perspective, the index is up nearly 60% since August 2nd. From the seasonality factor the 5-year trailing high for the index sits at 61.10%, 5-year trailing average is at 16.76% and 5-year trailing below is at -10.11%. If the clash continues between the US and China, which is likely the case, it is highly likely that the European STOXX can lose more blood. The STOXX 600 index is already down nearly 7% from its recent high of 395 formed on July 25th.
After RBNZ Move, RBA May Also Cut Interest Rate By 50-basis points
In the FX market, it is all about the Kiwi dollar which tanked over 2% due to a surprise interest rate cut by the Royal Bank of New Zealand. It was expected that the bank would slash the interest rate by 25 basis points however it rolled on its sleeves went for 50 basis points, the most aggressive interest rate cut among major central banks. The ripple effect can be seen for the Aussie dollar as well because speculators have started to chant for a similar size of interest rate cut by the RBA as well. as a result the Made a load of 0.667, something which isn’t witnessed in nearly a decade.
Gold Likely To Move Above 1500
Gold, the precious metal is the most interesting trade for investors. Since this month it is up over 5% and traders have no doubt that the resistance of 1500 which is more of a psychological level is going to melt in the coming days. The surge in the gold price is mainly due to the fact that investors are interested in the safe haven asset and there is nothing better than gold. This is the reason that the yellow metal has soared more than 17% from its year to date low. As long as the trade war remains on the table, and no one bothers to resolve it makers it (because of of their own ego issues), this situation will continue to impact the sentiment in the markets and traders will have no choice but to park their funds in gold.
Crude Oil In Bear Territory
As for the oil market, selling pressure has started to build, and as a result, crude oil has entered in bear market territory. The price has retraced over 20% from its recent high Off 65.92 formed back in April. of course there is nothing else to blame except a trade war and the sluggish global growth. I think it is likely that the crude price may continue to move lower and perhaps break below the critical level of 50 and continue its move towards the $45 mark.
