Uncertainty over U.S. trade policy and the political stability of Europe’s third-largest economy dominated market news on Monday.
Spot gold opened basically flat at $1,320/oz amid quiet activity in U.S. markets. Gold was still well off its overnight high of $1,328.50/oz prior to the opening bell in New York.
The silver price slipped 14¢ (-0.85%) to $16.37/oz. Platinum traded at $955/oz, down 0.8%.
Meanwhile, palladium sank 1.3% (-$13) to $970/oz.
Platinum and palladium each fared significantly worse than the other precious metals last week, fading 3.4% and 2.7%, respectively. This was due in part to a German court confirming that municipalities can restrict the use of diesel vehicles on city streets.
Markets Open Largely Unchanged From Friday’s Close
The U.S. dollar recovered modestly on Monday. The greenback traded at 90.1 on the DXY index after two consecutive losing sessions to end last week.
Stocks on Wall St were mixed on Friday. Although the Dow slipped 0.3% into the red, the S&P 500 gained 0.5% and the Nasdaq added almost 1.1%.
Equities were up slightly around Europe halfway through Monday’s session. Shares remained unchanged in Shanghai but plunged 2.3% in Hong Kong.
Indices were off in Tokyo as the yen continues to see safe-haven demand. The Nikkei 225 lost 0.66% and the Topix fell by 0.8%. The JPY was steady at ¥105.7 per dollar.
Both the euro and pound were unchanged at $1.23 and $1.38, respectively.
Continually rising forecasts for greater oil production in the U.S. (according to the International Energy Agency) have hurt crude prices of late. Brent crude slumped 4% last week; WTI wasn’t far behind (-3.6%).
This morning, the two oil benchmarks traded at $64.20/bbl and $61.20/bbl, respectively.
In bonds, the 10-year T-note yield last traded down four basis points to 2.83%, erasing most of Friday’s losses (+5 bp).
The financial sector is reacting positively to news last week that Congress will consider major changes to the Dodd-Frank banking regulations that were passed in the wake of the 2007-2008 financial crisis.
It figures to be a busy week for central banks: the European Central Bank (ECB), the Bank of Japan (BOJ), and the Reserve Bank of Australia (RBA) will all hold meetings.
Employment data for February will be released by the U.S. Department of Labor on Friday.
Trade War, Italian Elections Spark Uncertainty
U.S. markets and the dollar struggled to find a clear direction on Monday.
Fears of a looming trade war initiated by Washington had less of an impact than expected. However, this was probably a case of euro weakness balancing out the landscape.
President Trump hinted that his announcement of sweeping tariffs to protect U.S. steel producers may not apply as broadly as first assumed.
Certain favored trading partners, such as Canada and Mexico, may be exempt from these import duties. A months-long renegotiation of the North American Free Trade Agreement (NAFTA) is ongoing, perhaps muddying the situation.
Nonetheless, the perception of a coming “trade war” was evident when EU officials threatened to respond to the president’s trade policies by slapping their own tariffs on U.S. exports such as Levi’s jeans.
Aside from trade, Europe was also dealing with a minor political crisis.
The upstart Five Star Movement made big gains in Italy’s recent elections. It’s doubtful, however, that it will compromise with the country’s other major parties.
This means that Italy will either have a strange-bedfellows coalition, which usually leads to an unstable government, or no parties will be able to form a government. In the latter scenario, new elections would have to be called.
Italy’s sovereign debt already amounts to 130% of GDP. It’s actually the EU’s third-largest economy behind Germany and France.
The longer this political turmoil lasts, the more it will spook eurozone investors.
Germany’s Bundestag has been facing a somewhat similar impasse in forming a new government, but the outlook there is much more hopeful.
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