Anxiety hits markets as trade tensions mount; oil steady

Rising trade tensions between the world’s two largest economies have put emerging market assets under pressure.
Anxiety hits markets as trade tensions mount; oil steady

A sense of caution and unease lingered across financial markets today as investors grew increasingly concerned over US-China trade talks falling apart this week.

Rising trade tensions between the world’s two largest economies have hammered risk sentiment with global equities and emerging market assets under pressure. Should the United States end up increasing tariffs on imports from China on Friday, risk aversion is likely to become a dominant theme as global growth fears return with a vengeance.

Oil waits for fresh catalyst

Oil prices held steady on Tuesday as record Chinese imports and tighter global supplies slightly overshadowed concerns over rising US-China tensions.

The price action witnessed in recent days suggests that oil may be waiting for a fresh directional catalyst to push higher or trade lower. Lower oil prices will pressure energy-exporting emerging markets such as Nigeria.

With a handsome chunk of the nation’s export revenues sourced from oil sales, a drop in the commodity is negative for growth potential. Looking at the technical picture, WTI has scope to sink towards $60, which is Nigeria’s crude oil benchmark for the 2019 budget.

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Dollar hovers above 97.50

The US Dollar Index (DXY) has held steady around the 97.50 levels so far this week amid heightened uncertainty over US-China trade tensions.

Although the Dollar remains King of the currency space this week amid market uncertainty, the question remains for how long? Market players will be keeping a very close eye on trade talks in Washington this week, as any development on this front could spark volatility amid the fragile sentiment. Dollar bears are likely to enter the scene if trade tensions ease and both sides end up finding a middle ground on trade this week.

Currency spotlight: EUR-USD

EURUSD hovered around the 1.12 level, after the European Commission lowered the EU’s growth forecasts for 2019, with Germany’s growth projections reduced by more than half, down to 0.5 per cent for the year. The Eurozone continues to be a soft patch among major economies, contributing to the moderating path for global growth.

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Such a lacklustre trajectory is only going to put a lid on the Euro, with the outlook further clouded by trade tensions between major economies that have already adversely impacted Europe’s manufacturing sector.

Euro bulls have a tremendously difficult task of making their case amid such fragile economic conditions, as the EUR-USD’s bearish channel looks set to lead the currency pair towards the 1.11 support level.

Commodity spotlight – Gold

It has been a positive trading week for Gold thus far thanks to renewed US-China trade tensions and concerns over slowing global economic growth.

The precious metal has punched above $1,290 today and is positioned to trade higher as risk aversion accelerates the flight to safety. A daily close above $1,287 is likely to signal a move higher towards the psychological $1,300 level.

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