Global stocks continue to lose ground, beginning the second quarter on the back-foot amid widespread tech and trade war fears. Investors’ concerns increased following the “tit-for-tat’ Chinese measures, while the Trump administration has already promised to unveil this week a list of advanced technology Chinese imports targeted for US tariffs to punish Beijing over technology transfer policies. So, the two countries are obviously reluctant to make any concessions and ready for further trade fight, making stocks and risky assets on the whole vulnerable to further losses. European markets joined the global sell-off following a stumble in Asia. Tech stocks remain under intense pressure following another Trump’s assault on Amazon.com. Britain’s FTSE 100 declined by 0.14 per cent to 7,046, France’s CAC 40 dropped 0.52 per cent to 5,140 and German’s DAX 30 slumped 0.92% to 11,986. Wall Street futures meanwhile point mildly higher, though bearish risks remain high.
EURUSD continues to struggle for the 1.23 level and trading mostly flat on Tuesday. The pair still lacks impetus as the dollar remains relatively stable and the single currency has no any significant local drivers to show a more decisive dynamics. Mixed euro zone PMIs failed to give directional impulse to the pair, though capped the bullish attempts along with some dollar demand in Europe. The 1.2350 remains key to the upside as regaining this mark will open the way to 1.24 and higher. An opportunity for a bullish break may emerge on Wednesday as euro zone releases March CPI data. Should the inflation accelerate, EURUSD will receive a boost from bulls and may overcome the local resistance of 1.2350.
The GBPUSD pair refreshed session highs just below the 1.41 threshold post-UK manufacturing PMI which decelerated grows less than expected, to 55.1 against 55.2 in February. However, the upside potential remains limited as the greenback appears to find some buyers in recent trading. The pair looks set for further consolidation today unless comments by FOMC members Kashkari and Brainard surprise the dollar bulls to the upside. In this case, the pound will have to give up its modest daily gains and retreat below the 1.4050 area.
Oil prices so far fail to stage a sustained recovery from yesterday’s sell-off. Brent made some attempts to regain the $68 mark but retraced again. The bearish pressure intensified following controversial comments by Russia’s energy minister Alexander Novak. On the one hand, he highlighted that Russia is planning to fully comply with its commitment to cut oil output under the OPEC+ deal this month. On the other hand, the minister said that it’s too early to talk about extending oil pact worth the cartel. This announcement has confused oil traders as the market starts to doubt that the deal will really be prolonged for 2019. Another factor limiting the upside potential for Brent at the moment is the upcoming US inventory data as the market expects the crude oil stockpiles increased again last week. Against this background, the prospects for a more sustained recovery are rather timid for the time being. Brent remains vulnerable to further losses as long as it trades below $68.30.
Spot gold showed a spectacular recovery on Monday but failed to sustain the upside impulse and retreated from highs just below $1.345. The yellow metal remains volatile within a broader range, unable to stage a strong and long-term rally amid recent signs of dollar timid recovery. Gold prices are now trying to keep above the $1.335 mark as a drop below will open the way to further retreat with the next target of $1.320. In the short term, the bearish potential for the precious metal looks limited as the greenback struggles to attract buyers to stage a meaningful recovery.
Nathan Lambert, Head of Global FX Analytical Departament