The safe-haven demand is rather weak and sentiment could improve down the road
After last week’s rally in most global stocks, risk sentiment has deteriorated substantially on Monday, with high-yielding assets keeping losses nearly across the board. Trade-related optimism has waned after Trump said he would not roll back tariffs on Chinese goods despite he noted that the they are getting along very well with Beijing. Earlier, Chinese Ministry of Commerce said that that the two countries had agreed to reduce tariffs on each other’s imports as part of so-called first phase deal. On Monday, Chinese foreign ministry noted that there are no updates in trade talks and tariffs.
As a result, investors started to price in another escalation in the trade conflict after the recent progress. However, the latest rally in stock markets was probably overdone as neither side gave any details on the intermediate deal. Now, market participants will likely take a more cautious approach and could refrain from aggressive bullish bets, especially as many stock indices are now trading close to long-term or all-time highs.
Against this backdrop, gold prices received a boost and recovered above the $1,466 handle earlier in the day. However, the precious metal failed to preserve the upside momentum and gave back most intraday gains later, having settled around $1,460. Moreover, the bullion could yet turn red in the nearest future should investors fail to take the prices back above the 100DMA lost on Friday.
The Japanese yen, another safe-haven asset, also gained on Monday, sending the greenback below the 200-DMA. But the downside impetus in the USDJPY pair looks limited as well, which may signal a possible reversal in risk trends in the near term should the markets see fresh positive news headlines from the US or China. In other words, investors have shifted into a wait-and-see mode and in no rush to sell risky assets more aggressively.
Before the opening bell, US stock index futures are trading marginally lower after another record close on Friday. But when investors digest the latest developments on the trade front, the markets could regain the upside momentum and preserve the current bullish trend.