After last week’s selloff and thin volumes, US traders returned to their desks with vigour and enthusiasm following the Thanksgiving break. Riskier assets were once again in favour overnight as investors enjoyed an optimistic start to the week before the major events across the coming days threaten to pull up uncertainty once again.
The Dow jumped 350 points, staging a solid comeback after a series of lower lows across the previous week. Expectations of a record-breaking cyber Monday helped rebuff previous concerns of cooling demand and rising rates. Volumes in the markets were above average suggesting there could be more substance to this rally than a dead cat bounce.
That said, there are still plenty of risk events coming up over the rest of the week, which could quickly sap risk appetite and send stocks lower.
US – Sino Trade Progress At G20 Unlikely
President Trump was on hand to ensure trader optimism didn’t get too carried away by pouring cold water over hopes of a trade truce with China. Trump said that he expects to raise tariffs on China to 25% from the current 10%. His comments reflect how little progress has been made in trade talks so far and highlights the low probability for any deal to be agreed with China’s President Xi when the two Presidents meet at this week’s G20 summit.
Markets across Asia showed considerable resilience despite trade tensions returning to darken the outlook. Flows into the safe haven Japanese yen have only started to increase marginally in early trade after the yen actually closed the previous session lower versus the dollar.
The resilience seen in the Asian session is not looking spill over into the European session, with bourses across Europe pointing to a softer start.
Oil Under Pressure Amid Record Saudi Production
Oil edged lower in early trade after rebounding 3% in the previous session, following a 6% fall on Friday. Record production from Saudi Arabia is the last thing that this market needs right now. Oversupply concerns combined with slowing demand fears have seen an oil price correction develop into an oil rout of epic proportions. We are returning to the days of past, where the next OPEC meeting is being watched with a level of intensity not seen since 2016.
US Consumer Confidence to Slip
The dollar was coming off its highs as traders look towards the US consumer confidence release. US consumer confidence is expected to tick lower in November to 136, down from October’s 18 year high of 137.9.
A strong labour market with unemployment at multidecade lows of 3.7% has helped boost consumer confidence.
Additionally, low interest rates, low inflation and strong business confidence have all contributed towards lifting consumer spirits. However, prospects of higher interest rates could start to drag on consumer confidence and with the University of Michigan sentiment index also coming in lower, the risks are stacked to the downside.
Opening calls
FTSE to open 6 point lower at 7030
DAX to open 9 points lower at 11343
CAC to open 4 points lower at 4990