European open – Trade talks, Alibaba, gold, oil

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Trade War Obsession Continues

A mixed start to trading on Tuesday, with European stocks treading water as discussions continue between the world’s largest economies.

Source – Thomson Reuters Eikon

Heading into year-end, everyone outside the UK is fixated on these trade talks as both sides seek to de-escalate a trade war that has been building for much of the last two years. While little is changing from day to day, investors are craving daily updates and in the absence of much else to discuss, markets are sensitive to them.

We had another positive update overnight, with the Chinese Ministry of Commerce confirming that they had held another call with US negotiators. Of course, the details of the call were lacking but the language used was promising which, let’s face it, is all we have to go off and as long as that remains the case, investors will be optimistic of a deal.

Alibaba enjoys bumper first day in Hong Kong

Alibaba’s listing in Hong Kong was a success on the opening day of trading, with shares rising more than 6%. The largest listing of the year comes at a worrying time for Hong Kong but everything appears to have gone very smoothly. This was an opportunity to show that, despite the protests that have brought Hong Kong to a standstill and wreaked havoc on the economy, it’s business as usual for the stock exchange.

This comes after a successful weekend for pro-democracy advocates. The elections passed quite peacefully and saw pro-democracy candidates get the overwhelming backing of the electorate. Whether this changes anything will be seen in the coming weeks and months but I don’t think there is much optimism at this point.

Gold bearish but dragging its feet

Gold is relatively flat in early trade after coming under more pressure on Monday, as risk appetite ticked up a little. We’re now back around the $1,440-1,460 support zone and already something seems to be lacking. A break of this would be very significant and could potentially open up a move back towards the $1,400 area. As we’ve seen so far though, these breakouts can take time and really test the patience so we should be surprised if this drags its feet yet again.

Gold Daily Chart

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Oil looking a little overbought

Oil prices have stabilized in recent sessions, despite risk appetite improving and trade talks seemingly progressing. Following a rally of more than 10% since early last month, this does beg the question of whether it’s perhaps a little overextended to the upside. If long crude is a little bit of an overcrowded trade at this point, bullish headlines may struggle to give it a kick higher compared to what they would have a few weeks ago. Instead we may see some significant profit taking at the first sign of bearish triggers.

Brent Daily Chart

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.

Craig Erlam

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Sunday, 27 November 2022

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