Overnight trading revealed that markets have become weary once again as we saw the Asian equities fail to keep up with Wall Street’s gains, in which both the NASDAQ and S&P 500 posted record highs after a bounce higher in energy stocks due to a move higher in crud oil. The Nikkei 225 stalled just shy of the 20 000 mark for a gain of 0.1%, while the ASX 200 gained 0.2% after a fairly neutral RBA minutes release, in which the Bank sited concerns over the housing and labor markets while balancing it out with firm growth forecast for GDP. In China, both the Shanghai comp. and the Hang Seng lost 0.3% as regulatory concerns mount.
In FX, the USD remained subdued as we saw the USD Index, a measure of the strength of the USD against a basket of currencies, remain below the 99 level. The JPY found strength as sentiment soured overnight, prompting the USDJPY to fall back below the 113.50 level overturning strong buying pressure from late yesterday. The GBP remains muted ahead of today’s CPI release, in which we are expecting an increase of 2.6% year on year. If the actual beats the expectation, we will likely see the GBP strengthen as markets price in the need for a more hawkish BOE and vice versa should the figure disappoint. The EUR has climbed steadily against the USD as we see the 1.1000 handle under attack.
In commodities, gold continues to squeeze higher as risk sentiment sours with the 1235 resistance level being tested after bulls successfully defended the 1230 support level. Gold will remain bid, provided risk sentiment continues to sour, making 1250 a realistic target for buyer. However, if risk sentiment improves, bears will re-enter aggressively as we see 1200 being hunted. Crude oil enjoyed fresh buying power yesterday as we saw the $50 mark being tested on the back of positive rhetoric from Russia and Saudi Arabia, who have confirmed that they will look to extend the oil supply freeze into 2018. With the OPEC meeting, just around the corner, markets will remain sensitive to jawboning regarding supply, with the commodity being bought on news of supply cuts and sold on news of supply increases.