Seeking Alpha

Surge And Purge

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Includes: BAR, BNO, CNY, CYB, DBO, DBRT, DGL, DGLD, DGP, DGZ, DNO, DTO, DWT, DZZ, EWM, FXCH, GEUR, GHE, GHS, GLD, GLDI, GLDW, GLL, GTU, GYEN, IAU, OIL, OILD, OILK, OILU, OILX, OLEM, OLO, OUNZ, PHYS, QGLDX, SCO, SGOL, SZO, UBG, UBRT, UCO, UDN, UGL, UGLD, USAI, USDU, USL, USO, USOD, USOI, USOU, UUP, UWT, WTID, WTIU
by: Dean Popplewell

By Stephen Innes

The tale of the tape doesn't lie in this highly sensitive, headline-driven markets. US stocks spent the better part of the New York session playing headline catch-up as trade tensions between the U.S. and China apparently eased following last week's dust-up. But there is no rest for the weary, as the non-stop equity market surge and purge continues on the exhaustive list of negative narratives. US-China trade relations remain uncertain, geopolitical risk is jumping higher, and the Muller investigation continues to wear on sentiment as investors continue to sell the news and worry about the details later.

Currency markets were thrown a curve ball yesterday afternoon when a Bloomberg headline suggested that China is studying CNY devaluation as a potential tool in trade tensions. Investors need to be careful reading too much into all this nonsense, as it's incredibly unlikely given China's ambition to open up domestic markets, because any move to devalue the currency will bring back memories of 2015 and could cause irreparable damage to the yuan as far as internationalisation is concerned.

Oil

Oil prices rose along with broader markets as trade war tensions eased. But WTI is moving higher again as the geopolitical risk premiums are surging. Some traders are pointing to the latest escalation in Syria. But I suspect this move is all about positioning ahead of a high probability the US will impose sanctions on Iran; yesterday was new national security adviser John Bolton's official first day in office, and with his hawkish view of the Iranian conflict, sanctions are more likely than not.

Gold

It's been a strong start to the week for the precious metal despite the CoT reports suggesting that investors are paring back bullish bets on gold. But with geopolitical risk in the Middle East bubbling and the never-ending trade war headline risks, gold bid has remained exceptionally firm as the possibility of US military intervention in Syria has increased dramatically after an alleged chemical weapons attack. There's a very hawkish White House, and with all the options on the table, a US military strike cannot be ruled out.

Malaysian Ringgit

With all the RMB devaluation rhetoric, local investors remain very cautious, despite such interventions being very unlikely. But perhaps the coincidental timing of today's scheduled keynote speech by Chinese President Xi at the Boao Forum in Hainan is causing the jitters.

The ringgit is struggling to make headway this week as trade war tensions continue to boil under the surface and inflows have dropped to a trickle. Risk sentiment remains extraordinarily fragile, and investors are playing their cards very close to their chest. It seems that even with trade war tensions, easing $Asia remains a tough sell.