Capital.com market review for Tuesday 18 September 2018

The global markets took Washington’s decision to impose tariffs on Chinese imports mostly in their stride yesterday, even as Beijing retaliated by imposing its own tariffs of between 5 and 10% on $60bn of US imports.

China said the US’s decision undermined attempts between the two countries to broker a trade settlement, while President Trump promised to increase tariffs to 25% in 2019 if no deal could be struck.

Technology and energy stocks rallied to help the S&P 500 recover, putting it within touching distance of its record August close.

While a late rally for the dollar made up for its lack of movement earlier in the day, sterling hit a 7-week high before retreating ahead of a meeting of EU leaders in Salzburg that is expected to mark a turning point in Brexit negotiations.

The price of oil also rallied as Saudi Arabia said they were comfortable with Brent Crude at the $80 per barrel mark.

Forex

The pound continued its rise to hit a 7-week high of $1.3172 against the dollar yesterday before retreating to close 7 points down at $1.3140. The euro was flat, slipping 17 points to $1.1665 against the dollar. The announcement of UK consumer price inflation (CPI) this morning will likely buoy the pound, with CPI set to rise 2.7% year-on-year from 2.5% and 0.3% month-on-month from 0%. Core CPI will rise to 2.1% year-on-year from 1.9%.

Equities

In London, investors sidelined Washington’s decision to pursue tariffs against China, as the FTSE100 ended 1.87 points down at 7300.23. Meanwhile Germany’s DAX, holder of large exporters and car manufacturers, fell 61 points to 12,157.67. In New York, the S&P 500 rebounded after experiencing its worst day in a month on Monday, ending Tuesday 16.3 points up at 2,904.3– near the record close of 2,914.04 set in late August. The Dow Jones Industrial Average rose 0.7% while the NASDAQ gained 0.8%.

Commodities

The late rally in the dollar prevented a rise for gold, as the precious metal dropped $2 to $1,198 an ounce. Oil prices rallied following reports that Saudi Arabia would be willing to purchase at $80 a barrel, with Brent Crude touching $79.73 at one point during the day. The outcome of the US EIA crude inventories are set to be announced on Wednesday, with stockpiles forecast to fall by 1.2m barrels from a 5.3m barrels drop a week earlier.