Asian shares seesawed in cautious trading on Thursday with China extending losses as investors fretted about slowing global growth in the face of rising U.S. interest rates and trade tensions. U.S. stock futures also briefly pulled down after a bounce in Wall Street overnight, underscoring fragile investor sentiment following a rout in October and steep sell-offs in recent sessions. Investors are looking to a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping late this month for any signs of a de-escalation in the trade war between the economic superpowers. Trump and Xi plan to meet on the side-lines of a G20 summit, which is being held in Argentina at the end of November and early December. The United States and China have slapped import duties on each other’s goods in a tit-for-tat tariff war that investors worry could put the brakes on global trade and growth. Markets will also pay close attention to manufacturing activity reports from Japan, Europe and the United States due over the coming week or so.
The Federal Reserve’s future rate hike policy received moderate attention as traders start to question if the central bank could continue to increase rates without risking a slowdown in the U.S. economy. According to polls, analysts expected three more increases next year, taking the federal funds rate to 3.00-3.25% by the end of next year, although the third-rate rise is a close call.
Economic data scheduled for release is limited to prelim October consumer confidence numbers out of the Eurozone, with the ECB’s monetary policy meeting minutes scheduled for release ahead of the consumer confidence numbers to be the key driver later in the day. EURUSD is currently trading at 1.1400 level 0.14%. Outside of the numbers, we can expect the EUR to continue to respond to the EU Commission’s decision on the Italian coalition government’s budget and chatter from Italy in response, the EU now expected to decide on punitive measures, with Thanksgiving in the U.S expected to see lighter volumes.
The Pound is in the hands of Brexit chatter through the day, Theresa May’s progress on Brexit is critical to avoiding more backlash in Parliament ahead of the EU Summit. GBPUSD is up 0.05% at $1.2790, with Brexit news the key driver through the day.
In commodity markets, Oil prices slipped after U.S. crude inventories swelled to their highest level since December 2017 amid concerns of an emerging global glut, although the potential for a supply cut by OPEC prevented further drops. U.S. crude oil production remained at a record 11.7 million barrels per day, the EIA said. Brent crude oil futures bounced 0.4% to $63.25 per barrel after sliding more. U.S. West Texas Intermediate (WTI) crude futures, at $54.35 per barrel 28 cents 0.5 percent below their last settlement. Gold prices were on reports that Federal Reserve might consider a pause to the rate hikes cycle. Fed Chairman Jerome Powell warned last week of slowing demand abroad, fading fiscal stimulus at home and the lagged economic impact of the Fed’s past rate increases, suggesting that a pause in tightening may well come in 2019.