The shock that Donald Trump served to investors on Friday evening translated into Monday trading and caused rapid market reactions. At present, however, the situation seems to be stabilizing with more information on US-China relations.
Futures contracts on US stock indices are climbing up. S&P 500 gains 0.61 percent, Dow Jones 0.83 percent and Nasdaq 100 +0.84 percent. We also observe a significant return in the currencies considered as so-called safe haven. The US dollar has returned from a three-year low against the Japanese yen. The EUR/CHF exchange rate also increased, defending support at 1.0840. Futures contracts on US bonds have also retreated and the price of gold has fallen. There is no trace of earlier turbulence in the markets. Improvement in sentiment was caused by the statement by President Donald Trump that the US resumes trade talks with China.
However, Chinese media emphasize that no phone calls took place. "Based on what I know, the most important negotiators from China and the US have not had phone calls in recent days. Both sides maintain technical contact" said Global Times editor-in-chief Hu Xijin. However, more attention is drawn to the words of Donald Trump.
The optimism from the statement by the US president overshadowed even more terrible data from Germany, although they seemed to affect today's weakness of the euro. According to a publication from Monday, August 26, the Ifo business climate index in Germany fell to 94.3 points in August. The market consensus assumed publication at 95.1 points. As a result of the index decline, we saw the lowest reading since November 2012. The business expectations fell to 91.3 from 92.1 in July. In turn, the current condition indicator fell to 97.3 from 99.6 points in last month.
There are many indications that the US president could remain the main playmaker on the financial markets, and sentiment can be spoiled or improved by one tweet. Hence, it is still worth paying attention to how the US stock indices, yen and franc behave, as volatility in these markets may still be increased.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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