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Stocks slightly higher as markets await trade clarity

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Stocks are slightly higher as markets eagerly await this week’s results from trade talks. The key story of the day was the solid results from Walmart, which posted its best holiday results in over a decade, alleviating earlier concerns from last week’s terrible December retails reading. The dollar was slightly softer on the day many system traders cover dollar positions.

EUR- Vulnerable as markets may switch concerns to European trade war with US
Walmart – Strong earnings ease concerns of that US is not on terrible footing
ZAR- Wednesday’s budget is a make or break moment for the rand
GOLD – Continues grind higher.
OIL – Highest level since November and still rallying from trade talks

A positive resolution to the US-China trade war is expected to provide a boost to risk assets as global growth concerns will ease, but that may not necessarily spell relief for the euro as concerns will spread to the next trade war with will involve the US and their transatlantic partners. Today’s price action with both euro and sterling saw limited moves from the European Commission spokesperson Schinas’s comments that reiterated the EU’s stance that the EU will not accept a time limit on the Irish backstop and they will not reopen the withdrawal agreement.

The retail giant’s earnings results may alleviate the terrible December retail sales that sent shockwaves that the US economic cycle was over. Walmart’s best holiday result in over a decade however did little to boost equities as stocks trade little change in New York. Walmart was one of the beneficiaries to the shutdown of Toys R us stores. A strong 43% improvement with ecommerce sales also shows the company’s changes to assortment and delivery are working.

The South African rand will steal the spotlight after Finance Minister Tito Mboweni releases the budget on Wednesday. With South African barely holding onto investment grade with a BB+ rating at both Fitch and S&P, a non-deficit neutral budget with not a substantial effort to support Eskom could be the straw that breaks the camel’s back. Politics may be a key driver for the efforts in helping Eskom and that may be a key factor as elections are only 3 months away.

Gold is breaking out higher as the backdrop of a dovish Fed appears cemented and slower economic growth in the first half will be the base case story despite any resolution with the US- China trade war. The precious metal appears ready to rip higher as political worries in Europe remain high and expectations remain high for the European trade war with the US to commence once the one with China ends.

Crude prices remain near the highs of the week as optimism remains high for a positive next step in the US-China trade war. Oil reached a 3-month high, but the rally may start to stall as oversupply concerns from the US will return and as Saudi Aramco is addressing the damaged power cable at the world’s largest offshore field. Short-term disruptions from the Safaniyah field are being helped from increased production from the onshore Ghawar field.

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