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Is Gold heading down? - EMEA Brief 08 Jan

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  • Trading in Asia was mixed as investors try to balance macro risks with optimism towards trade talks. The top performers were Japan’s Topix and Australia’s S&P/ASX 200 both rose about 0.5%, while the Shanghai Composite Index lost 0.3%.
  • Gold prices edged lower as the greenback’s descendant spiral seem to have stopped and amidst the possibility of a pause in further rate hikes. The February contracts hit $1291.4 around 1:10am GMT before dropping consistently during the following hours, as can be seen on the IG Web Platform.
  • Oil crude rose for the seventh consecutive trading day as markets participants weigh in OPEC production cuts vows with concerns on high crude inventories after a record crude oil production year for US. West Texas Intermediate rose 0.3% to $48.67 a barrel.
  • The US dollar stabilized after five days of losses as the Trump administration deemed a trade deal with China “reasonable”. 

Asian overnight: A largely bullish session overnight saw Chinese stock markets provide the only negative move amid gains across the indices in Japan, Hong Kong, and Australia. Trade talks between the US and China remain ongoing, with hopes of a breakthrough and fears of a breakdown ensuring that we see volatility and uncertainty dominate. With those talks playing out as the backdrop, today’s release of US trade data will be watched carefully to see how they are changing in response to Trump imposed tariffs. We have already seen the Australian trade data released overnight, with a fall in import growth (2% from 3%) leading to an improvement in the overall balance of trade. We are likely to see markets continue their focus on talks between the US and China, with any update overshadowing much of the economic calendar. 

UK, US and Europe: Theresa May’s cabinet is due to meet today to discuss a plan drafted by pro-EU politicians that could reduce the risk of a no-deal Brexit. There’s speculation that the premier is thinking whether to accept changes in her budget legislation, which stresses how weak her position is on this final rally. Intra-day traders should focus on the cable this morning, as the markets keep pricing in aggravated political risk, and calling-off unnecessary short movements.

Economic calendar - key events and forecast (times in GMT)

EMEA Brief 8 Jan.png

Source: Daily FX Economic Calendar

10am – eurozone business confidence (December): expected to hold at 1.1. Market to watch: EUR crosses

1.30pm – US trade balance (November): deficit to fall to $54 billion from $55.5 billion. Market to watch: USD crosses

Corporate News, Upgrades and Downgrades

  • Morrisons said that sales rose 4% overall for the nine weeks to 1 January, while like-for-like sales excluding fuel were up 3.6%. Expectations for the 2019 financial year are unchanged. 
  • National Grid has reached a ‘satisfactory agreement’ with Massachusetts gas unions in contract negotiations over employment terms.  
  • Greene King remains confident in its overall outlook, after like-for-like sales rose 3.2% for the 36 weeks to 6 January. 

Bankia upgraded to hold at Jefferies
Outotec upgraded to buy at Goldman
Capital & Counties upgraded to add at Peel Hunt
Electrocomponents upgraded to buy at Jefferies

Geberit downgraded to sell at Goldman
Mapfre downgraded to neutral at JPMorgan
Vodafone downgraded to underperform at RBC
Ryanair downgraded to sell at Berenber

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