Markets pressured as oil declines

Stock markets were lacking vigor during trading on Monday as the lingering impact of Sunday’s tepid China trade figures weighed heavily on sentiment and renewed concerns over slowing economic growth in the world’s second largest economy. Although Asian markets managed to claw back previous gains, most major Asian stocks could be poised for further declines if expectations continue to diminish over the People’s Bank of China implementing further stimulus measures to revive growth in Beijing. This lackluster movement was also viewed in Europe with the FTSE100 concluding lower and with risk aversion encouraging market participants to scatter from riskier assets, American stocks could be open to further losses. With the violent swings in the oil markets having a firm grip on global stocks, stocks could be left vulnerable to deeper selloffs when oil prices resume their steep depreciation amid oversupply concerns.

BoJ threatens to intervene

The sharp one-sided appreciation of the Japanese Yen has enforced extreme pressure on the Japanese economy that strongly relies on export competitiveness from a weak currency to stave away deflationary pressures. With the USDJPY sinking to unfathomable levels after the BoJ’s unexpected decision to keep monetary policy measures unchanged, the nation has threatened to intervene in a fighting bid to regain stability. Despite the warning from the States over excessive currency depreciation, it seems that the pressure of a strong Yen may have caused the central bank to submit. Even if another aggressive batch of monetary policy is implemented, investors should remember the events of the last central bank intervention that caused the Yen to gain rather than depreciate. The Bank of Japan is in a tough position and with the laws of diminishing returns of monetary policy clearly hindering any actions taken, the Yen could be set to skyrocket in the medium term.

Crude oil sinks below $44

Crude oil prices tumbled below the $44 support during trading on Monday as speculation mounted over oil production potentially increasing following the replacement of oil minister Ali al-Naimi by Khaled al-Falih, the chairman of the state-run oil company Saudi Aramco. Saudi Arabia has stated that an oil freeze deal could only materialize if Iran partakes too, but with Iran on an ongoing quest to reclaim lost market share, expectations of a successful deal have been heavily diminished. Sentiment remains bearish towards oil and with bears invading below the $44 territory, sellers could have been granted an opportunity to install another heavy round of selling for prices to sink to $41.40. From a technical standpoint, previous resistance at $44 could transform into a dynamic resistance for a steep decline towards $41.40.

Commodity spotlight – Gold

Gold prices noticeably declined on Monday as a mixture of profit taking and dollar appreciation provided a platform for sellers to send prices lower. Although bears could be commended for their efforts, this commodity remains fundamentally bullish and could be poised to incline back towards $1305. Risk aversion remains rife while expectations over the Fed raising US rates have been buried away, a touch of Dollar weakness could be the catalyst that sends Gold prices back towards $1280 as the first key checkpoint. With today’s economic data calendar quite light, price action could whisk gold higher once a support has been formed. From a technical standpoint, bulls need to break back above the intraday $1268 resistance.