Kim Jong Un pushes nuclear gas pedal as seek for tradeoffs
Surprising detonation of H bomb by North Korea on Sunday halted a short period of market ease, heaping up investors in the safe heavens and leading to dollar rout. The impact of nuclear blasts as a factor of uncertainty can not be overstated, as the DPRK steps up its nuclear program despite the trade blockade and harsh criticism of the United States, Japan and South Korea. Questioning nuclear war dilemma of Henry Morgenthau and in best traditions of Soviet Union’s Xruschev nuclear threats and squabble seem to be the only tool for Kim Jong Un to conduct foreign policy. Being on the verge, there is no guarantee that he won’t start a real war. Officials from the United States, Japan and South Korea have repeatedly encouraged nonviolent approach to curb tensions, but Kim Jong-un is likely to advance in its program to seek better tradeoffs in case of a parley. South Korea has data that North Korean leader is going to launch an intercontinental ballistic missile capable of carrying a nuclear charge.
Uncertainty led the curve of the value of gold to a maximum since September 2016, then a pullback came in, as it stumbled upon resistance forces. Futures for gold peaked at $1,443.86 per troy ounce during London start. Escape from risk led Asian stock markets selloff, except China, which closed Monday in positive territory thanks to the successful action of the Chinese government to stabilize the economy economically and reduce the share of debt financing. European stocks are also experiencing an outflow of investors mainly because of the geopolitical factor, as well as growing risk-aversion before the ECB meeting on September 6. Despite the fact that September was considered a long-awaited month when Mario Draghi will give specifics about tapering off the QE, most experts of the Reuters expect a turning-point decision only in October, and the policy change should proceed exceptionally smoothly.
EURUSD added about half a percent, as weak data on the US labor market released on Friday put a dent on investor confidence in the US economy. Wage growth, a precursor of inflationary changes, amounted to only 0.1%, which allows us to expect the US economy will begin the fourth quarter with unsatisfactory inflation. The increase in jobs was also disappointing, as it turned out to be below forecasts. Unemployment rose from 4.3% to 4.4%, but this change can not be interpreted unambiguously positively or negatively, as employment in the US has recently shown a weak connection with inflation. The futures market estimates the probability of a rate hike in December at 37.3%.
Oil prices move in different directions, WTI finally began to win back losses after the hurricane Harvey, the most powerful in 12 years, paralyzed oil refining and drilling capacities near the largest fields in the US. Brent went into decline despite Russia's statement to support the extension of the OPEC + deal. The Baker Hughes report showed that the number of drilling rigs in the US increased by 3 to 943 (+446 from the same period last year). In Canada, their number decreased by 16 to 201.
Arthur Idiatulin
Uncertainty led the curve of the value of gold to a maximum since September 2016, then a pullback came in, as it stumbled upon resistance forces. Futures for gold peaked at $1,443.86 per troy ounce during London start. Escape from risk led Asian stock markets selloff, except China, which closed Monday in positive territory thanks to the successful action of the Chinese government to stabilize the economy economically and reduce the share of debt financing. European stocks are also experiencing an outflow of investors mainly because of the geopolitical factor, as well as growing risk-aversion before the ECB meeting on September 6. Despite the fact that September was considered a long-awaited month when Mario Draghi will give specifics about tapering off the QE, most experts of the Reuters expect a turning-point decision only in October, and the policy change should proceed exceptionally smoothly.
EURUSD added about half a percent, as weak data on the US labor market released on Friday put a dent on investor confidence in the US economy. Wage growth, a precursor of inflationary changes, amounted to only 0.1%, which allows us to expect the US economy will begin the fourth quarter with unsatisfactory inflation. The increase in jobs was also disappointing, as it turned out to be below forecasts. Unemployment rose from 4.3% to 4.4%, but this change can not be interpreted unambiguously positively or negatively, as employment in the US has recently shown a weak connection with inflation. The futures market estimates the probability of a rate hike in December at 37.3%.
Oil prices move in different directions, WTI finally began to win back losses after the hurricane Harvey, the most powerful in 12 years, paralyzed oil refining and drilling capacities near the largest fields in the US. Brent went into decline despite Russia's statement to support the extension of the OPEC + deal. The Baker Hughes report showed that the number of drilling rigs in the US increased by 3 to 943 (+446 from the same period last year). In Canada, their number decreased by 16 to 201.
Arthur Idiatulin
Trade active:
Short play has been triggered at expected level.
Closing part of the trade and hold the rest till TP
Closing part of the trade and hold the rest till TP
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results
