Morning Market Overview

Wednesday was yet another highly volatile day in all the main asset trading markets including the oil complex. Yesterday’s above normal level of volatility was driven from a growing view that the US and China are on a path to a trade war. This view was fueled by China announcing their plans for tariffs on US goods.

As we have discussed many times markets do not like uncertainty and talks of trade wars is contributing to the growing cloud of uncertainty. In addition, the other uncertainty contributing factor is whether inflation risk is rising. Wednesday the ADP private jobs number came in much higher than expected suggesting that Friday’s very important US Labor Department employment number may also come in above the current market consensus which will further add to the inflation narrative.

Overall the above still fall into the category of perception of the risk for a trade war as well as perception that inflation will surge forward. So far this is not the case for either of these factors. That said market participants are trading as if they were both upon us.

On the financial front global equity markets were mostly lower around the world with the US markets trading strongly higher after starting the session significantly lower.

The EMI Index decreased by 0.52 percent with the year to date gain now at 1 percent. Only one of the ten bourses in the Index is still in positive territory for 2018.

London is in the worst performing spot in the Index with Brazil in the top spot with a 9.9 percent gain for the year. The lower value direction in global equity markets was a negative but offset a tad by the recovery of the US equity complex.