Global equity bulls are continuing their unstoppable momentum into the conclusion of the trading week, as well-orchestrated, cautious remarks from a chorus of central bank heavyweights fuel speculation that a new era of monetary policy easing to counter decelerating global growth is on the menu.
Major central banks including the European Central Bank (ECB), Federal Reserve (FED), Bank of England (BoE) and Bank of Japan (BoJ) have all signalled a willingness to ease policy if needed, consequently reviving risk sentiment among investors.
The smoky atmosphere clouding the global outlook of unpredictable external risks has persistently weighed on the world economic outlook, meaning that the prospect of central banks coming to the rescue has provided the hero to this story that investors want to see.
Although Asian shares saw some mild profit taking on Friday morning, they are still en route to posting their best weekly gains since January. The real winner from the Fed’s dovish statement and return of risk appetite is the S&P 500, which has set a new record high of 2954.18.
While the stock market rally is commendable, the pressing question on the minds of many investors is whether this momentum is sustainable. Where global stocks trade during the third quarter of 2019 will be highly dependent on US-China trade developments and whether major central banks actually move forward with easing monetary policy. Should trade tensions remain a major theme and central banks hold back from easing, equity markets could find themselves exposed to downside shocks.
Gold leaps past $1400 on Dollar weakness and geopolitics
It has been an incredibly bullish trading week for Gold which has blasted past the $1400 level for the first time since 2013.
The combination of Dollar weakness, speculation over lower US interest rates and geopolitical tensions have encouraged investors to sprint to the hills and pick up Gold in their portfolio.
With major central banks signalling potential rate cuts in the future, Gold is set to push higher, especially when considering how the precious metal performs well in low interest rate environments. Looking at the technical picture, Gold has already hit $1400 on the daily charts. A weekly close above this level is seen encouraging a move towards $1413.
Commodity spotlight – Oil
Oil markets were turbocharged by geopolitical tensions this week with Brent rushing past $64, its highest level since May.
While geopolitical tensions appear to be doing OPEC+ a favour by supporting Oil prices, the question is – for how long?
The OPEC+ alliance appears set to extend its supply cuts into the second half of 2019, as producers look to build a more sustainable floor under Oil prices and rebalance global markets. Despite pushing higher on the back of geopolitical tensions, Oil prices remain exposed to downside shocks. For as long as concerns over slowing global growth and weak demand for Crude remain major themes, the Oil rally is at risk of running out of steam, regardless of the expected OPEC+ extensions on supply cuts.