(18 AUGUST 2020)DAILY MARKET BRIEF 2:US-China tensions ramp up on new Huawei restrictions

(18 AUGUST 2020)DAILY MARKET BRIEF 2:US-China tensions ramp up on new Huawei restrictions

18 August 2020, 09:27
Jiming Huang
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Escalating US-China tensions weighed on sentiment in Asia. Equities in Shanghai (+0.32%) and Hong Kong (-0.02%) lacked direction, the ASX (+1.00%) erased earlier gains as the Reserve Bank of Australia (RBA) minutes hinted at no further measures to loosen the financial conditions and the Nikkei (-0.29%) suffered from a stronger yen.

Activity on European futures hint at a soft start on Tuesday. Energy and financials will likely continue weighing on the FTSE 100.

Demand in US treasuries rose as markets lacked direction; the US 10-year yield is below the 0.70% mark again.

Hesitation in risk assets and the retreat in US yields fueled demand in gold, sending the price of an ounce to $1995 in Asia. We could see a renewed advance above the $2000 handle as the persistent softness in the US dollar remains supportive of gains, but entering new long positions at the current levels demands solid nerves given the potential of a severe one-off correction in a market swamped with speculative positions.

The EURUSD and the GBPUSD are poised for further gains on the back of a persistent sell-off in the US dollar, as well. In the absence of major economic data and events, traders will likely avoid swimming against the tide.

WTI crude consolidates above its 200-day moving average despite weak economic data and waning demand prospects. Yet, solid offers are eyed above the $43 per barrel.

By Ipek Ozkardeskaya


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