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Rangebound trade continues

Sit tight and wait seems to be the prime directive for markets ahead of the G20 with Asia markets looking to go nowhere still prior to the Trump-Xi meeting.

Back and forth headlines on trade

Wall Street saw a boost at the start of the Wednesday session with treasury secretary Steven Mnuchin expressing that there is ‘a path to complete’ a US-China trade deal and the deal had previously been ‘about 90%’ done. That said, scepticism appears to have set in thereafter to see the likes of the Dow and S&P 500 indices conclude the session lower. Adding on to the confusing pre-talks signals for markets had been President Donald Trump’s warning of a ‘Plan B’ whereby ‘billions and billions of dollars’ in the form of tariffs would be seen and ‘less and less business’ may be exchanged.

While headlines had been expected to drive markets ahead of the G20 Trump-Xi congregation, the mixed signs provided little direction in terms of broad expectations of the outcome for markets. The painful lack of direction for markets may well sustain into the end of the week even while the S&P 500 index finds flickers of upside on its volatility index, the VIX, going into Wednesday.

Oil price on a tear

Notably while the moves had been muted for the broad US indices, a breakdown by sector for the comprehensive S&P 500 index finds hope within markets continuing to carry the cyclical sectors through. The energy sector had received an additional boost with the surprise massive drawdown in US crude inventories based on the latest EIA reporting. In line with the private API report, the EIA reflected a 12.8 million barrels decline in crude inventories from last week that bumped Brent crude prices to trade briefly above $66 per barrel. With the OPEC meeting being the next blockbuster event for crude prices, the upward momentum may be sustained in the near term, one for both oil prices and energy stocks to watch.

Source: IG Charts

Asia open

As told above, the modus operandi ahead of key event risks, particularly of the geopolitical kind, appears to be maintaining cautiousness. With this in mind, this lacklustre trade for Asia markets may well sustain counting down to when President Donald Trump and President Xi Jinping sit together for their bilateral meeting. Look to the string of tier-2 data in the day including May industrial profits out of China. Post Asia hours, the third estimate of the US Q1 GDP will be released, though unlikely to be market moving given the backward looking nature.

Yesterday: S&P 500 -0.12%; DJIA -0.04%; DAX +0.14%; FTSE -0.08%


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