Mixed day as markets await FOMC minutes and trade updates

Summary:

• Mixed day for stocks 

• Oil dips after inventory build

• GBP Spike fades along with deal hopes

• Turkey begins military action in Syria

• Trade in focus as US-China meet for key talks

Overall it’s been a fairly quiet day for stocks with the major benchmarks trading slightly higher but in a controlled fashion that suggests they are awaiting a further catalyst before embarking on a sustained move. That could come from this evening’s FOMC minutes release but in all likelihood it will be trade related as the focus turns to US and China trade talks. 

There was a bit of a pullback in the Oil markets following the release of the latest US inventory data with both Oil and Oil.WTI paring their earlier gains. The latest EIA report gave the following figures:

• Oil inventories: +2.9M vs +1.9M exp. API: +4.1M

• Gasoline: -1.2M vs -0.9M exp. API: -5.9M

• Distillates: -3.9M vs -2.0M exp. API; -4.0M

• Refinery utilistation: -0.7% vs -0.35%

On the whole this is a fairly mixed release with the headline rising more than expected (but less than the API) but both gasoline and distillates showing drawdowns. The markets are attempting to regain their poise on the European close with both Oil and Oil.WTI trading higher by around 1%. 

There was a flurry of activity in the pound in recent trade with a spike higher after news hit the wires that the EU is ready to make a major concession on a Brexit deal. Quoting diplomatic sources close to the talks the Times reported that European governments are prepared to concede a unilateral withdrawal from an interim after a set period of time - with 2025 being touted. While this appears constructive No 10 has already told the EU that it won’t accept a Northern Ireland only backstop - regardless of a time-limit - and it’s quite feasible that this is little more than posturing and the next move in the Brexit blame game. The UK have since rebuffed the offer and the early gains have been reversed with GBPUSD trading back around the 5-week low of $1.22 at the time of writing. 

Recep Erdgoan, the president of Turkey announced that country begins offensive in Syria to force back Kurdish militants that control the border area. Except that, he mentioned that the military action would be also targeted at the Islamic State. The decision was made after the phone call between Trump and Erdogan in which the president of the US said that American troops who had been working closely with Kurdish forces in the fight against ISIS would pull back which clears the way for the Turkish invasion. The lira reacted nervously on the news and is the lowest against the greenback since August.

If last week’s market moves were mainly driven by economic releases, the theme this week has been far more focused on politics with the latest developments on trade at the forefront of traders’ minds. Thursday will see the start of the first minister-level meetings in more than two months between the US and China as the world’s two largest economies come to the negotiating table to try and hammer out a deal on trade. Read our full article on the lstest trade situation here.