It’s been a rough start to the week for stock markets, with trade data from China not helping to lift the mood at a time when we’ve already been seeing a little more risk aversion.
August is typically viewed as a quieter month for financial markets and it would appear this year is no different. Investors more broadly remain very buoyant but that clearly hasn’t been reflected in this month’s performance so far.
The trade data from China was undoubtedly disappointing as it once again showed sluggish demand both domestically and externally, which is consistent with what we’ve seen elsewhere. But while we’ve seen plenty of evidence of this in recent months, imports and exports were well short of expectations.
The economy is quite clearly in need of a boost and I’m just not convinced it’s going to come, not in the forceful and widespread manner it has in the past. Authorities are more likely to engage in smaller, targeted measures that won’t provide the confidence boost investors, or households can really get behind. The sluggish recovery looks set to continue.
China data weighs on crude prices
The data from China appears to be weighing on oil prices today, which is understandable with it being the world’s second-largest economy. Still, oil remains not far from yesterday’s highs, having recovered more than 20% since late June.
Clearly, the cuts from Saudi Arabia and Russia are working, on top of all of those implemented by OPEC+ since late last year. The market now looks much tighter and the economic outlook is potentially a little brighter too, with central banks either at or very close to the end of their tightening cycles.
Gold continues lower after Bowman comments
We saw a spirited recovery in gold last month but it appears to have quickly run out of steam, with the yellow metal slipping again over the last few weeks. The dollar has performed much better as yields have firmed, which has dragged gold lower in the process.
While traders are still confident that the Fed is probably done with tightening – possibly slightly less so after Michelle Bowman’s comments – there remains considerable uncertainty around how long rates will remain high and how quickly they’ll fall when they finally do. That remains a significant headwind for gold.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
