Rare!!! China is holding five military exercises at the same time and warning the US! The first big event of the week hit gold and US stocks.

On Monday, as markets awaited the week’s big events, the DOLLAR index fell back, on track for its biggest one-day percentage drop in a month. U.S. stocks and spot gold rallied, with the Dow Gaining 500 points and spot gold rising above $1,870 an ounce. This week, the candidates in the US presidential election will hold their first debate, with the release of the non-farm payrolls report. China announced on Monday that it would carry out five military exercises in four major waters, a rare arrangement amid rising tensions between the US and China and across the Taiwan Strait.

Five military exercises have been held simultaneously in different areas along China’s coast

China began five simultaneous military exercises in different coastal regions on Monday, the second in two months to take place amid rising regional tensions.

Two of the drills took place near the Paracel islands in the disputed South China Sea, one in the East China Sea and the other farther north in the Bohai Sea, China’s maritime Safety Administration said in a notice on its website.

In a separate notice, the live-fire exercises in the southern Yellow Sea will take place from Monday to Wednesday, while exercises in other waters will last only one day, it said.

All ships are banned from entering the area, the announcement said.

To train a combat-ready military, China regularly conducts military exercises, but rarely many at the same time.

Last month, China announced four exercises in the Bohai, East and Yellow Seas, as well as in the disputed South China Sea, in what Chinese military experts say is a rare arrangement.

Last month, the United States sent a spy plane into a no-fly zone over China’s live-fire military exercises. China has lodged “solemn representations” to the US side.

China and the United States have recently sparred over a range of issues including Taiwan, novel Coronavirus pandemic, trade and human rights.

China has also conducted frequent military activities near Taiwan, which it claims as its own, and has taken the usual step of declaring that such exercises are aimed at The island.

Military tensions across the Taiwan Strait escalated sharply in mid-month when China sent dozens of aircraft, including fighter jets, bombers and surveillance planes, across the middle line for days of harassment and deterrence during a visit to Taiwan by U.S. Deputy Secretary of State John Crouch. Taiwan’s military has warned that such a move by China would be highly likely to cause a brush fire.

The U.S. State Department has criticized China for militarizing the Spratly Islands on its own terms, saying the facilities it has built in the region are a platform for ‘coercion’ of neighboring countries.

State Department spokesman Morgan Ortagus said China is deploying anti-ship cruise missiles there, improving reconnaissance capabilities, building airstrips, building jet fighter hangars and more.

“[China] USES these militarised facilities as a platform for coercion to strengthen its control over the waters,” the spokesman said. But China does not have a sovereign basis consistent with international law, He said.

On September 28, the Chinese foreign ministry regular press conference, the Chinese spokesman said Wang Wenbin, “spratly islands are a part of China, China in the spratly islands deploy necessary homeland defense facilities, is the exercise of right of self-preservation and self-defense, given by the international law is within the scope of China’s sovereignty, reasonable, fair and lawful, has nothing to do with the military, it with other countries on their territory protection in essence no different.”

Facts have proved that the United States has become the biggest threat to peace and stability in the South China Sea, wang said, adding that the international community and regional countries must be highly vigilant and firmly oppose the sinister plot of some “warmongers” in the United States to destabilize the South China Sea and East Asia. “China has the determination and ability to firmly safeguard national sovereignty and territorial security, and will continue to firmly work with countries in the region to safeguard peace and stability in the South China Sea,” Wang stressed. “We urge some people on the US side not to make groundless attacks and accusations against China and not to act rashly.” Wang Wenbin said.

Market trend: the dollar fell back U.S. gold rose

The dollar retreated from a two-month high against a basket of currencies on Monday as stocks rebounded from four straight weeks of losses ahead of a slew of U.S. economic data and political developments.

A rally in U.S. stocks over the weekend helped slow the rise of the dollar, seen as a haven, but there were signs that the post-outbreak recovery was slowing and political uncertainty put investors on the defensive.

Wall Street’s major indexes rebounded after four straight weeks of losses, rising more than 1 percent. The Dow Jones Industrial Average rose 460 points, or 1.69 percent, after rising as much as 500 points earlier. The S&P 500 rose 1.5 percent, while the Nasdaq rose 1.4 percent.

House Speaker Nancy Pelosi said Sunday that she believes an agreement with the White House on a new coronavirus rescue package is possible as negotiations continue.

Still, the major indexes are likely to fall sharply in September. September was the worst month in stock market history. The Dow and S&P 500 are down nearly 2% and 4.4%, respectively, so far, while the Nasdaq is down 6.1%. The s&p 500 had already rebounded sharply from the coronavirus sell-off, when it was up more than 50% from its March bottom.

“September was a tough month for U.S. stocks, especially the NASDAQ,” wrote Mike Wilson, chief U.S. equity strategist at Morgan Stanley. We expect inflation to persist into October as clear risk events persist. From a micro perspective, this is just a correction in the new bull market, and the beneficiaries of the economic restart still have the best chance.”

“Unless the labor market data is really bad this week, if it stabilizes we may not have stimulus until after the election, and I don’t think anyone is holding their breath right now,” said Edward Moya, senior market analyst at OANDA in New York.

“If the stock market goes up, the dollar can’t go up now, and it will continue to do so, but there will be volatility this week.”

The dollar index.DXY fell as low as 94.15, its biggest daily percentage drop in a month, before recovering to trade around 94.34. The dollar hit a two-month high of 94.745 last week, its biggest weekly gain since early April.

Data on dollar futures positions released on Friday also suggested the dollar has further to rise as speculators hold large net short dollar positions and could cover if the greenback gains.

The commodity Futures Trading Commission’s overall assessment of dollar positions showed speculators’ net short positions rose to $33.989 billion last week, up from $31.524 billion the previous week and close to their highest level in nearly a decade.

On the other side is a large net long position in the euro, which edged up to $27.922 billion last week.

Investors’ attention may now turn to the first US presidential debate on Tuesday.

At the same time, many worry that the economic recovery is stalling now that many stimulus packages have expired, depressing consumer spending.

More data on the health of the U.S. economy will be released this week, including consumer confidence on Tuesday, manufacturing surveys and consumer data on Thursday, and non-farm payrolls on Friday.

Gold rose, recouping earlier losses as the dollar retreated from a two-month high ahead of this week’s U.S. presidential debate, though a rebound in stocks capped gains.

Spot gold rose more than 0.6 percent to as high as $1,876.95 an ounce, pulling up $28 from a session low.

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