The major catalyst that caused a dramatic turnaround in today’s fortunes was an amendment to the planned 1 Sep US 10% tariffs imposed on Chinese imports: some of which will now be delayed until Dec ’19 including crucially smartphones: this will help Apple. Commodities reacted rapidly to this change in tack with oil adding over 5% to clear the $61 level while copper, iron ore and many of the base metals rallied up to 2% and more. The Mining and Oil and Gas sectors reacted in response lifting the FTSE 100 and spreading green across the UK indices as worry gave way to relief. The FTSE 100 closed up 0.55%, FTSE250 up 0.5% while the AIM All-Share was almost unchanged at +0.04%. The TechMARK also added 0.3%. In terms of market charts, the FTSE 100 tested the 200MA again today and rallied to close above it. Price action over the next few days will be key in confirming this nascent bullish signal.
In other macro data, UK wage inflation came in at 3.7% meeting expectations while German CPI came in as expected as 1.7% : the US CPI came in at 2.2% against 2.1% expected. These data helped steady GBP and USD while GBP gained o.2% against EUR. Some cheer for GBP may have been derived from the reassuring trade rhetoric from US’s John Bolton who suggested the UK were “first in line” for a deal with the US: the proof will come when the UK stands alone in negotiation with what is typically a tough and oversized adversarial counterpart.
As highlighted yesterday, gold did breakout from the $1500 level yesterday peaking at $1535 and further extending its run from $1400 on 1 Aug : a move of almost 10% in 10 trading days. The rapid sell-off from this level gave a good signal to close any shorter-term longs. The pullback was accelerated this afternoon when US-China trade tariff tension eased with gold falling to 1480 as a kneejerk response: it has since returned to $1500. A more detailed analysis of gold with charts will be posted on runprofits tomorrow.
In market sentiment, the impact of the delay in trade tariffs are reflected in the reduction of the US VIX by almost 20% to below 18 while the Fear & Greed Index remains at Fear. Of the 1405 stocks covered 480 rose, 545 fell and 380 were unchanged.