Higher Open Likely For US Markets: Oil, Gold Up

Higher open likely for the U.S markets Tuesday after the U.S. stock index futures looked positive Tuesday morning.

At 6 a.m. ET, Dow futures indicated a positive open of about 85 points. The S&P and Nasdaq futures also looked higher on Tuesday morning.

Market sentiments turned better after China’s central bank said it wanted the currency yuan to trade higher against the dollar.

China’s gambit of letting fall yuan to a decade-low Vs dollar thrashed the Wall Street and other equity markets to the worst trading on Monday in 2019.

The U.S Treasury Department responded by designating China a currency manipulator.

This led China to act and the central bank set the yuan’s official reference point at stronger than the key 7 yuan-to-the-dollar point on Tuesday. The move helped in restoring sanity in currency markets.

“The United States disregards the facts and unreasonably affixes China with the label of ‘currency manipulators,’ which is a behavior that harms others and oneself,” the PBOC said in a statement.

Beijing also confirmed that it would suspend agricultural product purchases from the U.S in response to new American tariffs mooted by President Donald Trump.

China also said more than stopping the purchase of American farm products, it would “not rule out” tariffs on newly purchased agricultural goods after Aug. 3.

China's reaction is against the U.S threat of 10 percent tariffs on another $300 billion worth of Chinese goods starting Sept. 1.

At the data front, there will be a new Jolts report (Job Openings and Labor Turnover Survey) coming at 10 a.m. ET. Avantor, Bausch Health Disney, Host Hotels, Match Group, and Wynn Resorts will release their earnings on Tuesday.

Oil price up

Oil prices jumped on Tuesday; Brent crude rose on Tuesday, after falling to its lowest since January on Monday.

Brent fell more than 3 percent on Monday concerns escalated that the ongoing trade dispute between the world’s two biggest oil buyers-U.S and China will cripple demand.

Brent crude futures jumped 0.8 percent to $60.28 a barrel by 0351 GMT from $59.07, the lowest since Jan. 14.

West Texas Intermediate (WTI) crude futures rose 0.9 percent to $55.16 per barrel.

“The market is back short-covering and there’s also some amount of profit-booking today,” commented Sukrit Vijayakar, director, energy consultancy Trifecta.

But the falling yuan may boost Chinese exports making them cheaper but oil imports will become costly as they are priced in dollars and the import volumes are too high.

“Despite the threat of supply disruption in the Middle East, the U.S.-China trade dispute is a bigger concern at the moment,” commented Stephen Innes, managing partner at VM Markets said in a note.

Asian markets shed losses, Europe up

Asian markets recovered from earlier losses but declines persisted Tuesday after the U.S.-China trade war intensified.

Shares in mainland China slipped. The Shanghai composite fell 1.56 percent while Hong Kong’s Hang Seng index slipped 0.67 percent.

Japan’s Nikkei 225 was down 0.65 percent; the Topix index declined 0.44 percent. South Korea’s Kospi shed 1.51 percent while Australia’s ASX 200 crashed 2.44 percent.

But Indian shares reversed losses and traded higher on Tuesday, as investors awaited the central bank’s monetary policy decision on Wednesday.

The broader NSE Nifty was up 0.62 percent as of 0409 GMT, while the benchmark BSE Sensex shot up 0.57 percent.

A Reuters poll showed that the Reserve Bank of India may cut interest rates to augment growth and spending.

European stocks traded higher Tuesday after China’s central bank corrected the yuan’s official reference point to a stronger level than Monday. The pan-European Stoxx 600 jumped 0.4 percent.

This followed China’s central bank People’s Bank of China re-setting the midpoint for the yuan at 6.9683 per dollar.

Gold price zooms

Gold prices zoomed on Tuesday and stood close to a six-year high as investors scrambled for safe-haven assets after the U.S trade war with Beijing worsened and China was labeled a currency manipulator.

Spot gold tumbled 0.2 percent at $1,460.19 per ounce as of 0734 GMT after peaking to the highest since May 2013, at $1,474.81, earlier in the session.

The U.S. gold futures fell 0.3 percent at $1,472.40 an ounce.

Gold’s momentum was also helped by the dollar’s decline to a two-week low and the U.S. longer-dated Treasury yields also fell heavily.