GOLD & CRUDE OIL TALKING POINTS:
- Commodity prices drop in tandem amid broad-based risk aversion
- Crude oil faces added pressure as EIA report shock inventory build
- US/China trade war breakthrough hopes fuel sentiment recovery
A wave of selling hit the commodities space yesterday as worries about escalating tensions between the US and Turkey[1] soured investors’ mood across financial markets. Crude oil and gold prices fell alongside the MSCI Emerging Markets stock index – which suffered the largest one-day drop in five months – as well as the broader S&P 500[2] benchmark.
Oil prices’ descent was amplified by EIA inventory flow data, which showed that US stockpiles unexpectedly added 6.81 million barrels last week. That marks the largest increase in seven months. The outcome echoed an API estimate published yesterday[3], disappointing analysts’ consensus forecast calling for a 2.9 million barrel drawdown.
OIL, GOLD MAY RISE ON HOPES FOR US/CHINA TRADE WAR BREAKTHOUGH
From here, a dull offering of economic data is likely to keep sentiment front and center. Risk appetite is on the mend in Asia Pacific hours amid hopes for a breakthrough in US/China trade relations[4]. That follows news that China’s Vice Commerce Minister will travel to the US for high-level talks in late August.
Futures tracking the FTSE 100[5] and S&P 500 are pointing decidedly higher before London and New York come online, hinting the chipper mood has scope for follow-through. Commodity prices may broadly recover in such a scenario as markets unwind at least some of the prior day’s catch-all slump.
