As earnings season picks up, the majority of early corporate profit reports are coming in better than expected, but U.S. stock index futures are being weighed down on faltering trade talks between the U.S. and China. President Donald Trump reiterates his complaint that his Chinese counterpart is not delivering on a promise to buy more agricultural products. China is frustrated that the U.S. is not delivering any substantial progress with the easing of restrictions on technology giant Huawei.
It appears both sides are still playing chicken, and expectations continue to dwindle that we will see a trade deal done this year.
Last night, Netflix (NASDAQ:NFLX) delivered a huge subscriber growth miss both internationally and domestically. Netflix lost customers in the second quarter in what was their worst performance in eight years. Rising competition from Disney and Comcast (NASDAQ:CMCSA) will make the road ahead harder for the streaming giant. Netflix is calling for a huge third-quarter rebound, but if skepticism grows for next quarter, we could see traders kick them out of their FAANG stocks holdings.
Oil
Crude prices climbed higher after Iranian television reported the Iran’s Revolutionary Guard seized a foreign vessel that was smuggling fuel in the Persian Gulf. Geopolitical tensions are running high, whether it is tanker attacks, drones getting shot down, increased Iranian sanctions or the inevitable likelihood that we will see the U.S. military become an escort service to assure safe tanker passage in the Persian Gulf.
While yesterday’s EIA report was bearish overall, despite a decent drawdown with the headline, U.S. crude oil inventories are expected to decline over the next couple of months. In the short-term, slowing global demand will remain the biggest headwind for crude prices.
Gold
The bullion rally is tentatively being replaced by silver. The Gold/Silver ratio is finally correcting itself after earlier peaking last week around the 93 level. Now down towards 88, investors could continue to run to silver as historically the inflation hedge typically benefits silver after the gold trade gets overdone.
The prospect of extraordinary monetary policy easing globally will support both precious metals but in the short-term, silver has some catching up to do.
Bitcoin’s selling pressure that stemmed from Congressional leaders voicing their concerns over Facebook’s Libra and cryptocurrencies in general appear to be over. Bitcoin is now attempting to regain the $10,000 level and we could see volatility ease in the short-term as cryptocurrency backers remain optimistic that current laws restrict regulators in shutting down new digital coins.
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