Market Brief: Iran retaliation fears quash rebound attempt

Risk assets look unlikely to reclaim their solid advance out of the gates in 2020 anytime soon


Stock market snapshot as of [3/1/2020 3:48 pm]

  • …And in a flash, it was gone. U.S. and European stock markets have ceded the best levels gained on one of the most bullish starts of the year seen for decades.
  • Massive street demonstrations in Iran have followed the U.S airstrike on Iraq that killed Qassem Soleiman, a notorious general who commanded proxy militias that extended Iran’s power across the Middle East. The demos add to concerns that Tehran will feel compelled to retaliate
  • As such, chances that a further escalation of tensions with Washington can be avoided, appear to be low.  Risk assets therefore look unlikely to reclaim their solid advance out of the gates in 2020 anytime soon
  • As ever, time will tell the true extent of investor reaction vs. over-reaction. (The VIX volatility gauge and U.S. oil have surged the most since early December)
  • But it’s already clear that that volumes of 2020 outlook commentary mostly did not factor in a sudden and severe deterioration of Middle East risks. Worries that moderate stock market progress widely forecast for the year may be in jeopardy won’t be easy to allay
  • See a first take of the impact on oil and gold by Senior Technical Analyst Matt Simpson here
  • A softer than forecast December manufacturing index from the ISM isn’t helping sentiment. It was weakest since June 2009. The employment component also ticked deeper into contractio territory, a negative omen for next week’s payrolls. The ISM’s more pivotal Non-Manufacturing data are due on Tuesday

Stocks/sectors on the move

  • U.S. stock indices made an early bid to break into positive territory, with a decent gradient off lows, but that has faltered. Of major markets, only the FTSE managed this feat (just). Thank inflated oil prices and the market’s outsize weighting of crude producers
  • Energy is predictably among the few sectors in the green on both sides of the Atlantic
  • BP is one of the oil supermajors in the spotlight, as my colleague Fiona Cincotta points out here
  • British American Tobacco almost single-handedly lifts the consumer sector into positive as well. Smoking product makers are seeing a relief rally after the Trump administration indicated a temporary ban on flavoured vaping products could be lifted if manufacturers demonstrate they’re not targeting youngsters
  • Technology leads the downside in Europe. However Apple continued to outpace U.S. blue-chip shares. A 0.5% fall earlier compared with the Nasdaq 100’s -0.8%. AAPL remains within touching distance of psychologically charged $300



FX snapshot as of [3/1/2020 3:48 pm]

View our guide on how to interpret the FX Dashboard


FX markets and gold

  • The dollar’s haven characteristics kick-in, with the euro bearing the brunt
  • Gold is back near six-year highs on its own haven demand. Bullion has been as much as 1.5% higher near 1551.52. Ironically, with a test of the September $1557 high brought on much earlier than expected, momentum conditions may not favour strongly extended gains from here
  • Classic risk proxies are paired elsewhere as Aussie slumps the most amongst majors vs. the yen. Against the dollar, significant sell stops were very likely to have been intense around 0.6940
  • Still, note that the single currency also exerts a significant toll on AUD. Assessments of the precise level of current risk appetite are not straightforward to make
  • The loonie sees some protection due to its strong tie to oil, mostly at the expense of sterling

 

Economic highlights




Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.