US stock markets are flying on President Xi’s conciliatory overtones over tariffs which have diffused building trade war tensions. Investors took great comfort in his remarks as the S&P 500 remained on the ups into the closing bell. In a market starved of good news, Xi’s dialed back trade war rhetoric was music to investor’s ears.
While investors are relishing this moment, trade war issues are not about to leave the political stage any time soon. In fact President X’s remarks, while conciliatory to tariffs, were restatements of previous pledges with no new compromises to President Trump.
Oil Markets
Oil prices are towering on the heightened tension in the Middle East, and the looming May 12 Iran nuclear deadline. But the significant counterbalance remains US crude oil production which for the week ending March 30 increased to 10.460 million bpd. Also, The American Petroleum Institute reported a surprise build of 1.758 million barrels which has temporarily taken a bit of wind out of market sails.
However, with all the possible supply disruptors, traders are content to stay long the commodity given a likely chance the US will impose sanctions on Iran and will have a 'forceful' response to Syria.
Gold Markets
Trade war on/trade war off is very much the tale of the tape as gold prices erased early gains to trade lower on Tuesday after President Xi dialed back trade rhetoric. But with investors positioning for the Iran and Syria geopolitical flashpoints to reignite, gold remained and should remain firmly bid on the dip.
Currency Markets
Not sure I have a great deal to add. The revolving door of risk ambulations is exceedingly challenging to anticipate let alone trade.
Japanese Yen
JPY was the worst as USDJPY crept back up to 107.20+ on improved risk sentiment. Nevertheless, still, very much a range trade with traders content to add some small shorts on upticks awaiting the next wave or risk aversion.
The Euro
The markets were adding to EURUSD longs the back of hawkish comments from the ECB’s Nowotny. To be honest, this provided a welcome distraction from all the trade noise!!
The Malaysian Ringgit
Asia FX traded lower on the positive regional momentum following CNH gains after President Xi ’s speech, which hit all the right buttons for regional growth.
But the ringgit remains very much stuck in neutral, and not unexpectedly so given the mild political headwinds. Oil prices continue to be incredibly supportive, but investors appear more content to sit this one out until the election passes.