GOLD
As Tuesday’s European session gets underway, gold prices are hovering just below the $2,000 mark. Support for the precious metal comes mainly from the geopolitical instability that continues to worry investors. The conflict in Gaza dominates attention, and as the ground invasion by Israel seems to be materialising, the financial markets continue to price in the risk of an escalation, driving demand for the haven gold. At the same time, the US dollar remains strongly supported in relation to other major currencies, with the index that measures its performance close to the two-year maximum touched earlier in the month. The Federal Reserve is meeting this week, and there is still some uncertainty about whether Jerome Powell and his peers will hike rates once more; this uncertainty keeps the greenback supported and treasury yields high, capping the upside for gold generated by the haven trade.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stock benchmarks traded higher in Europe on Tuesday, despite Asian shares closing mixed, while economic and geopolitical uncertainties linger.
The STOXX-50 climbed higher, with poor performances from the energy sector due to the price drop in BP shares after the company missed results estimates, offset by increasing appetite for all other sectors in Europe, especially in real estate stocks.
The strengthened market sentiment towards riskier assets comes as a surprise this morning after investors witnessed poor industrial production data from China as they await the next key CPI report from the Eurozone later this morning. Meanwhile, the ruling-out of a ceasefire by Israel and the pursuit of the ground operation in Gaza should also have negatively impacted risk appetite.
With that in mind, we may be seeing the calm before the storm regarding today’s market configuration, as traders could be buying a rumour before selling the news, pricing in some significant improvements on EU inflation, which is expected to show a strong decrease compared to last month (3.1% exp. Vs 4.3% prev.).
More than ever, investors remain data-dependent, especially as uncertainties are increasing on the geopolitical front. If this week’s data from the EU and the US prove disappointing, then a sharp price action could be seen towards riskier assets such as stocks.
The STOXX-50 index still consolidates between 4,075.0pts and 4,000.0pts, as traders await further market catalysts.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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