In European markets on Monday (August 31), global trading volume was muted, with European and US stock markets mixed. In the currency market, the DOLLAR hovered around 92.30 and appeared to remain under pressure, while the euro rose modestly, reaching a session high of 1.1935. In the commodity market, spot gold prices fell back to around 1965; Silver rose more than 1 percent to as high as $28.152 an ounce. U.S. crude oil rose more than 1% to as high as $43.57 an ounce. This week, markets have focused on the fed officials’ speeches and the U.S. employment report. At the same time, geopolitical risk events such as the SITUATION in China and the US, as well as the latest news on the COVID-19 epidemic, are also likely to move the market.
In terms of information today, the latest news of the border conflict between China and India came out again: The Indian military said that the Chinese People’s Liberation Army (PLA) violated the consensus reached by the two countries in military and diplomatic mediation and conducted provocative military actions to change the status quo on the night of 29th and 30th. Chinese Foreign Ministry spokesman Zhao Lijian responded at a regular press conference August 31 that Chinese border troops have always strictly observed the Line of Actual control and have never crossed the line. Two GuoBianFang forces maintained communication has always been a looming problem. There are also media reports that Indian Prime Minister Narendra Modi is attending a meeting to be briefed on the situation by the military. India’s national security Chief Ajit Doval is chairing a China study group that is likely to meet soon to discuss new deadlocked relations between India and China.
World stocks: Global stocks hovered near record highs on Monday and are expected to end August with five straight months of gains as investors bet that central Banks will continue to ease policy for years to come. Yahoo Finance reports that massive monetary and fiscal stimulus measures have boosted stocks in recent months, overshadowing concerns about the outlook for the coronavirus-hit global economy.
Last week, Federal Reserve Chairman Colin Powell gave stocks a boost by promising to keep average inflation at 2%, allowing prices to rise further to balance periods of weaker-than-expected inflation. The risk of higher inflation in the future, assuming the Fed can do so, is enough to push up long-term Treasury yields and sharply steepen the yield curve.
The 30-year yield jumped nearly 16 basis points last week and was last at 1.50 percent, 137 basis points above the two-year yield. That spread is now close to the 146 basis point spread it reached in June, its widest since late 2017.
“We now know that the Fed is supportive of inflation and will not be as strict as before, so it makes sense for yields to go up,” said Eric Vanraes, fixed income portfolio manager at Eric Sturdza Investments in New York.
“But at the same time, we are in a difficult economic situation and the Fed cannot allow the curve to steepen dramatically or its efforts to combat the crisis will be destroyed,” he said.
“I think at some point we will see a correction but not a crash. “This is normally good news for the market because the stock market is too high and out of touch with economic reality and corporate earnings.”
Federal Reserve officials will speak this week, and Vice Chairman Richard Clarida will speak later Monday.
Currency: The dollar came under overall pressure, with the euro/DOLLAR recovering from earlier losses and now modestly higher, hitting as high as 1.1937. GBP/USD fell slightly, as low as near 1.33; Usd/JPY rose as high as 105.96.
In response to the dollar’s moves, FX168 wrote earlier that the dollar index was showing some activity following Friday’s sharp retreat to a weekly low around 92.20. Still, bears have been unable to push the dollar index further down to its lowest level since May 2018 in the 92-dollar zone.
At the same time, investors continue to focus on broad risk appetite trends in determining the direction of the dollar, and US politics continue to dominate as the November election approaches.
On a technical level, a break above 93.47 would point to 93.99 and 94.20 (the 38.2% Fibonacci retracement of the 2017-2018 decline). On the downside, the next support is 92.20, followed by 92.13 and 91.92 (the 23.6 percent Fipo retracement of the 2017-2018 decline).
“Even though the U.S. central bank may be happy with the interpretation of its measures, this is not good news for the dollar,” analysts at Commerzbank said in a note, according to Reuters.
Gold: Spot gold was back below $1970 on the last day of trading in August, edging down 0.5% so far this month and likely ending a four-month winning streak. The dollar index may have fallen for the fourth month in a row.
Kyle Rodda, analyst at IG Markets, said the volatility in the DOLLAR had affected the gold market. “Friday’s dollar weakness came as market participants digested Powell’s Jackson Hole speech, and gold received a boost.”
Edward Meir, an analyst at ED&F Man Capital Markets, said the gold market is likely to retest its highs, with nothing changing the positive fundamentals.
Technically, gold prices fell from SMA on August 21, even after maintaining Friday’s break above the downtrend since August 7. With a third pullback from the key SMA and a bearish MACD, gold has a higher chance of falling to a short-term support line (forward resistance) near $1939.
But the uptrend line since July 17 is now at $1913, limiting further declines. Once below $1913, the 50 – day SMA average of $1889 will attract market attention. In contrast, an intraday break above the 21-day SMA of $1970 would point to $2,000 as well as the August 18 peak of $2015 and an all-time high of $2075.
The latest news on the situation between China and the US and the border conflicts between China and India!
FX68 previously cited reports that the Indian military issued a statement on 31 August saying that on the night of 29 and 30 August 2020, the People’s Liberation Army (PLA) took provocative military actions to change the status quo in violation of the consensus reached through military and diplomatic contacts during the previous stand-off in eastern Ladakh.
Said in a statement, the Indian army launched a pre-emptive strike, in class and lake (Pangong Tso) on the measures to strengthen the position of India, intent to defeat China unilaterally change the ground truth. Said in a statement, the Indian army is committed to through dialogue and maintain peace and tranquility, but also determination to protect its territorial integrity.
‘To address these issues, China and India are holding a bridger-level flag meeting in Chushul to deal with the situation,’ the statement added. No specific casualties were given, according to an Indian military statement.
India Today revealed more details on August 31. The report said several Indian military sources told India Today that The Chinese military had tried to get more than 500 soldiers into the Indian area near Lake Banguong.
However, these sources said Indian troops had taken these positions before China. The Indian military source added: “So far, there have been no physical clashes between Indian and Chinese forces in the vicinity of the southern bank of Lake Bangong in eastern Ladakh.”
Responding to the latest allegations from India, Chinese Foreign Ministry spokesman Zhao Lijian said at a regular press conference on August 31 that Chinese border troops have always strictly observed the Line of Actual Control and have never crossed the line. Two GuoBianFang forces maintained communication has always been a looming problem.
“China and India have maintained close communication through diplomatic and military channels,” Zhao added. As for the specific meeting and talks, if we have news, we will release in time. “
It is reported that Indian Prime Minister Narendra Modi is attending a meeting to be briefed on the situation of the military. India’s national security Chief Ajit Doval is chairing a China study group that is likely to meet soon to discuss new deadlocked relations between India and China.
Situation in China and the United States, according to Taiwan’s defense department announced on August 31, “north to China southern American destroyers b after the Taiwan strait, travel south to continue”, and refers to the ship to perform general navigation task transit through the Taiwan strait, Taiwan using joint supervisor as budgeting, own the surrounding sea, and the relevant dynamic airspace, conditions are normal.
According to the latest reports by Taiwan’s China Times and other Taiwan media, the report on the Military power of the Communist Party of China (CPC) for 2020 prepared by the Taiwan defense department was sent to the legislative Yuan this morning.
In the report, Taiwan’s defense department confirmed publicly for the first time, “the communist party of China (sea and air warships were sent daily, machine, a bug central to western cruised airspace is engaged in the straits of routine tasks”, saying that “the recent U.S. joint Allies to expand in the east China sea and Taiwan strait and south China sea, the ship has been drawn, and the communist party of China” on the ship will with, and on every machine will check ‘, also adjust the coastal airport to increase in many new type air forces, in response to American machine ship to high strength, wide range of close up reconnaissance and free running as normal “.
For the people’s liberation army military aircraft appeared in the Taiwan strait, east zone, a spokesman for hardware and air force senior colonel had naval and air force combat readiness cruise speaking, said Taiwan and its affiliated islands are an inalienable part of sacred Chinese territory, the Chinese army combat readiness cruise completely legitimate, aimed at the current security situation in the Taiwan strait and safeguarding state sovereignty need to take the necessary actions. The armed forces in the THEATER have the determination and capability to thwart all separatist activities aimed at “Taiwan independence”, resolutely safeguard China’s sovereignty and security and territorial integrity, and firmly safeguard peace and stability in the Taiwan Straits.
On top of that, financial markets are set to release a slew of new key data this week. Most important is THE RELEASE of US jobs data on Friday. Other U.S. data include Tuesday’s ISM manufacturing PMI, Wednesday’s “small farm” ADP report on private payrolls and factory orders, and Thursday’s jobless claims and ISM non-manufacturing PMI.