Trade Sanctions & Commodities
Sally Limantour
This morning we have a slew of more buy out news but so far the market is ignoring this and yesterday’s action was telling as we quickly gave up the previous day’s (Friday) value area which indicated a trend day down. Has anything changed other than Richard Russell who has been bearish for years has now turned bullish?
One thing bothering me in the background is potential protectionist measures. We need to watch the upcoming Chinese delegation on May 22nd to see if there is any rhetoric in this direction. Morgan Stanley’s Stephen Roach believes the US Congress has bipartisan support for trade sanctions against China and possibly Japan. In front of a tripartite Congressional hearing on trade issues last Wednesday he said, “My worst fears were realized. At the end of three hours of grueling give and take, I left capital hill more convinced than ever that the protectionist train has left the station.”
Today in FT there is an article titled Globalization’s losers need support which also hints at protectionist measures: http://www.ft.com/cms/s/3e39c1ca-022b-11dc-ac32-000b5df10621.html
Commodities were bashed across the board yesterday after their recent rally and this has a feel of across the board liquidation. Gold has the upcoming rollover from June to August which typically sees selling pressure. Physical demand is strong and any trade back to $655-660 should be supported. If not, this will be telling. Keep in mind that gold was nailed last year during this time frame and bottomed in mid June.
