Market Overview

This week started violently with a plunge in prices of precious metals, but seems to have a pretty calm end. Gold and silver found their "hungry" adepts by Wednesday morning, and both assets quickly moved to the area of moderate levels waiting there for the fresh fundamental or technical drivers. But any new support winds are not seen on the horizon yet, as it seems that the investment community has armed itself with patience to wait until the final scene of bipartisan all-in wrestling show having to do with the stimulus package and also to public messages concerning the sidelines of the U.S.-Sino unromantic rendezvous, where the two economic superpowers are going to review the state of their mutual relations. 

Both sides desperately need to make sure that they are on the same page of the trade agreement implementation. But a good signal came on Thursday evening from the White House as an influential Donald Trump's adviser Larry Kudlow said the Capitol Hill is satisfied with China’s progress in meeting commitments to purchase U.S. goods in a "phase one" deal. China “is now really picking up their imports of our commodities – which is a great boon, by the way, for the U.S. agriculture and farm sector,” Kudlow told reporters, while expounding the stance of the White House Trade Representative Robert Lighthizer as he prepared remarks for President Trump. Mr Lighthizer and Chinese Vice-Premier Liu He are the heads of delegations to conduct the semi-annual meeting on the trade deal appointed on Saturday in the form of a videoconference. “We have big differences with China on other matters, but regarding the phase one trade deal, we are engaging,” Kudlow said. 

Amid the pandemic, China’s purchases of U.S. goods, energy and services had a slow start with some lag, which made it complicated to fulfil an obligation to increase the import volumes by $77 billion before the end of 2020 and by $200 billion over two years. But, Lighthizer has reported that China is now buying over 40% of the American commodity exports, compared to about 20% in the baseline year of 2017, according to Kudlow. All these pragmatic calculations may have inspired markets to have hopes for further growth, pushing the tensions on Huawei or TikTok cases, Hong Kong status and even virus origin mutual accusations somewhere into the background. 

Meanwhile, the trading activity in financial markets may be muted either until the end of Friday's session, or at least until the release of the U.S. retail sales report at 12.30 GMT. The average expectations by the polls of various information resources show almost two % of possible monthly growth in the common retail sales of the July indicator, and not less than 1.3% for the core retail sales, which is the sales volume excluding automobiles. If the figures generally meet or even exceed expectations, it may also cut the ground under the safe-haven purchases of the U.S. Treasury bonds, which means it may not prevent the launch of a deferred effect for an additional capital outflow from the U.S. national currency, as the Treasury does not feel the limits of its borrowing power and the so-called "printing press". The same brilliant Mr Kudlow said to CNBC yesterday, "this is the time to borrow with ten-year yields down at 0.6%". 

The U.S. continuing jobless claims also sent a positive message for the world economy after this important employment indicator declined by more than 0.6 million to 15.486 million people for the previous week, as the initial jobless claims dropped almost by 230,000 people too. At the same time, the retail sales figures in China for July are slightly missing forecasts today, but it may not be fair to characterise the data as disappointing. The annual decline in retail sales in China fell to just -1.1% compared to -1.8% a month earlier, -2.8% in May, -7.5% in April, -15.8% in March and -20.5% in February. Chinese mainland retail sales are -10.44% on year-to-date. That means the current level if compared with the beginning of January. The industrial production data showed -0.4% even in year-to-date figures, almost totally recovered if compared with -13.5% industrial plunge just at the bottom of the coronacrisis. The Chinese primary consumer sentiment index by Thomson Reuters (PCSI) exposed its best readings for the couple of years at 75.34 points. 

Retail and consumer segments, as well as the labour market indications, are voicing for a further recovery for both of the world's largest economies. Markets, of course, may be sensitive to the fresh releases from the United States, including not only retail sales, but also Michigan University consumer sentiment, consumer expectations and current condition indexes, which are going to be released at 14.00 GMT today. It is a possible intraday scenario of some Friday's partial profit-taking by short-term traders, in a short time gap between the reports or soon after them, but the positions of mid-term investors in the foreign currency or stock markets are unlikely to undergo critical changes before this weekend.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.