The buzz from the apparent de-escalation of trade tensions between the U.S. and China continues to be the only show in town, with Wall Street posting healthy gains again overnight.

The U.S. ISM Non-Manufacturing PMI drew sighs of relief as it rose to an above-consensus 56.4. It allowed the street to ignore the very poor Markit Services PMI which printed 50.70, well below forecast. The U.S. consumer spending is the bedrock of the economy, and any signs of storm clouds should have sent a chill through the markets. I have learnt the hard way, though, never to stand in front of short-term sentiment unless you have deep pockets. That sentiment, for now, is still taking in the sugar rush from the resumption of U.S.-China trade talks in October. Asia’s data calendar is again thin today with most of the street’s attention focused on this evening’s U.S. Non-Farm Payroll (NFP) data, exected to add 158,000 jobs. Trading NFP is like dealing with the U.K. Parliament, it promises a lot initially, but quickly turns and bites you, leaving you more confused than when you started. I would expect the sentiment generated by the resumption of trade talks to supersede even a lousy print.


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Wall Street followed Asia’s lead and powered higher overnight. The S&P 500 rising 1.30%, the Nasdaq 1.75% and the Dow Jones 1.41% putting Wall Street within shouting distance of all-time highs again, how the worm turns. Asia is set for an equally impressive start, with Japan’s Nikkei 2.61% higher in early trade and the Australian ASX up by 1.25%. Only a Presidential Tweet could take the wind out of Asia’s sails this morning.

Hong Kong may struggle to match the likely rises on regional markets as investors remain concerned that government concessions may not be enough to keep protestors off the street this weekend.CurrenciesThe dollar edged higher overnight with the dollar index rising 0.05% to 98.40. That doesn’t tell the full story though; the British Pound has risen 0.60% to 1.2330, as the U.K. Parliament continues to lock up P.M. Johnson’s Brexit strategies in the Tower of London. The dollar rose against the CHF and JPY, both haven currencies, as trade worries dissipated overnight. The USD/CHF rose 0.54% to 0.9895, and the USD/JPY rose 0.53% to 106.93. The FX market continues to be somewhat circumspect about the prospects for either a trade deal or an improvement in the global macro picture. That should stop regional currencies today though, enjoying renewed inflows coat-tailing the rise in local equity markets.


Oil clearly didn’t read the script followed by other markets overnight. The surprise 4.8 million barrel drawdown in U.S. official inventories saw oil spike two per cent higher initially, but both contracts quickly gave up those gains to finish almost flat. Brent crude rose only 0.46% to $61.10 a barrel and WTI rose 0.36% to $56.20 a barrel. The underwhelming performance, as equity markets reached for the sky, should be a warning shot against overexuberance on trade de-escalation. When a bellwether to global trade fails to rally on positive trade news, we should all be taking note. For now, I will regard it as a one-day aberration possibly driven by extended long-positioning already in place.


Treasury yields rose sharply on new trade talks overnight crushing gold’s safe-haven desirability. Gold dropped 33 dollars, or 2.16%, to $1519.00 an ounce as investors stampeded for the door in their haste to unwind multi-month risk hedging positions. October is still a long way off, and the unseemly rush to exit gold may prove premature. However, that is a story for another day, and for now, short-term trade-driven sentiment dictates that gold (and silver) will remain on the back foot. Gold has initial support at $1505.00, the overnight low, and then long-term support at $1480.00. Short-term resistance is at $1520.00 and then $1533.00 an ounce.

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