Markets Flat On Final Day Of The Week

Investors optimistic about Sino-US talks

A pretty flat open is expected in European markets on Friday, as we wrap up another week one step closer to a US-China trade deal and hopefully one week closer to a Brexit agreement.

With major central banks around the world in a much more accommodative place now compared with a few months ago, these are the two primary concerns for investors at a time when the economic outlook is foggy, to borrow a term from BoE Governor Mark Carney.

There is genuine optimism around the trade talks between the two largest economies, with the latest reports suggesting that they’re at an advanced stage. At the very least then we can expect an extension of the truce and both sides working towards the removal of tariffs, which is a big relief for investors.

The Brexit negotiations on the other hand don’t appear to be going quite as smoothly, although there is a strong sense that there’s a lot of politics being played on both sides which will enable them to drag it out until the last minute and give the impression of a long hard-fought negotiation. How that will play out next week when Theresa May is due to being a deal back for a vote in Parliament will certainly be interesting.

Gold pares gains on resurgent dollar

Gold Daily Chart

A rebound in the dollar on Thursday put pressure back on gold which had been heading towards $1,350 but quickly reversed course back towards prior resistance around $1,320. This has offered some support in the near-term and gold continues to look bullish in a favourable environment for the yellow metal.

A resurgent dollar remains the primary headwind for gold but even then we’ve continued to see it make strides higher, albeit at a slower pace. If a more accommodative monetary environment can be matched with dollar softness then this will be very favourable and could accelerate the move higher.

Oil rally stalls just as key resistance breaks

Weekly US Field Production Of Crude Oil

The oil rally has stalled over the last week just as it appeared to break above a key resistance area. A fifth consecutive rise in US inventories won’t be helping the rally in oil prices, with record levels of US output – peaking at 12 million barrels a day this month - a strong contributor to that.

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