Indices Rise as the Nuclear Summit is on again, Oil Extends Slide

Equities

Major US indices kicked-off the week with a gap higher as investors felt optimism from President Trump’s latest tweet. Trump tweeted on Sunday that a team from the United States arrived in North Korea to make arrangements for the summit between Kim Jon Un and himself. Global indices dropped Thursday after Trump announced the cancelation of the summit. Moreover, Trump administration told the Congress that they made a deal for ZTE which might allow trade negotiations between China and the United States to go forward and easy the trade war fears. The US stock market will be closed today for the Memorial Day.

USD

The Greenback dropped from a six-month high ahead of key data this week. The dollar index gained five percent in the past six weeks as the United States economic outlook continued to strengthen. The economic reports are allowing the Federal Reserve to move forward with its tightening monetary policy stance which has created an interest rate gap between the United States and its rivals.

 EUR

The Euro bounced-off 2018 lows as the Italian president tried to ease investors’ fears over the political situation in Italy. The Italian president, Sergio Mattarella, blocked the formation of a new government to avoid any action that might endanger Italy’s membership in the single currency. The Euro fell for six consecutive weeks for the first time since December 2014. The economic slowdown and political uncertainty are weighing heavily on the common currency. The minutes of the European Central Bank last week revealed that the policymakers are worried from the slowdown in the Eurozone which will delay the tapering program of the Bank.

Gold

Gold prices started the week lower as the latest actions from Trump supported risk appetite against safer investments. Gold rose to the highs of $1308 post dovish FOMC minutes and Trump’s declaration of ditching the nuclear summit. However, the deal with ZTE and the rearrangement of the nuclear summit helped to ease the trade war fears and geopolitical risks leading investors to risk-on trading.

Oil

Oil prices fell to six-week lows as the top oil producers are considering raising their oil supplies along with the increased US oil production. US Oil futures are down almost ten percent in less than a week retreating from the highest levels since late 2014. OPEC and Russia agreed last year to reduce oil supplies to support the falling oil prices. On Friday, Saudi and Russia discussed raising their oil production by around 1 million barrel per day to cover the lost supplies from Venezuela and Iran. On the other hand, US Baker Hughes reported that the U.S. energy companies added 15 rigs last week to reach a total of 859 which is the highest since 2015. The US oil production is up 27% in the past two years. The rig count is clear evidence that the production will continue to rise.

Major Economic Events

 
Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.