Stock market rally turns sour

Published date: 03/12/2019

The equity market rally was going so well but then unpredictable trade war headlines came in and ruined the party. President Trump said will increase tariffs on China if nothing happens between now and December 15th, Not only this US manufacturing PMI (ISM) also missed against expectations to compound the bad news. By the end of the session, the Nasdaq fell 1.12%, S&P 0.86% and the Dow dropped 0.96%. It was a similar story in Asia as the ASX tanked 2.19% and the Nikkei lost 0.64% of its value.

Overnight we also had the RBA rate decision where as expected they kept rates unchanged. The Australian dollar is one of the best performers overnight following the decision and two cuts are still being priced in before the end of 2020.

Gold has really failed to capitalise on the move in stocks. Interestingly the USD also moved south and there was still no real reaction from the precious metal. We will be watching gold carefully over the coming days as something has to give here.

In predictable fashion, copper struggled as both weak manufacturing and trade war headlines hurt the red metal. This morning copper trades 0.36% lower at $2.62/lb.

Oil markets are also softer this morning, spot WTI is half a percent lower trading at $56.19/bbl. Later in today's session, we will get the latest API inventory number but the key theme is still the OPEC extension or cuts.

Today we are looking out for UK construction PMI, EU PPI,  API inventories and comments for ECB's Mersch, Coeure and de Cos.


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