Dubai: Caution may prevail in world equity markets for time being amid the continuing stand-off between North Korea and the United States even as traders will glue on to the central bankers meet in Wyoming later this month for direction.
The Dow Jones Industrial Average fell 300 points last week as traders went in a risk off mode due to continuing war of words from the US president Donald Trump.
The S&P 500 index shed around 1.6 per cent last week, its biggest weekly fall since November 4, 2016.
“We firmly believe in a helmets-on stance until the North Korea situation has cleared,” said John J Hardy John J Hardy, Head of forex Strategy at Saxo Bank.
Until the week to August 4, the US indices was on a record breaking spree. The Dow gained 11 per cent in 2017, even as Wall Street loses confidence that Trump and a Republican-controlled Congress this year will cut taxes and increase spending on infrastructure.
Traders will eye the European Central Bank president Mario Draghi’s speech at Jackson Hole, Wyoming later this month is the next direction in equity and currency markets.
The risk off sentiment has benefited gold, considered as a safe haven metal in times of uncertainty.
On Friday, gold neared the keenly watched $1,300 (Dh4,771) an ounce mark. The metal climbed 2.3 per cent last week, posting the fourth weekly gain in five.
“The situation is ducking investors from jumping into a risk on mode. The war of words between the two countries US and North Korea is helping the yellow metal to score more gains. The momentum would remain strong as long as the rhetorical brinkmanship between President Trump and North Korea does not come to end,” said Naeem Aslam, chief market analyst with Think Markets. Gold has shed more than 3 per cent of its value so far in the year.
Oil
Oil prices will continue to move sideways amid bullish US production and bearish Opec fundamentals due to rising supplies.
“While bulls are building a long position [again], the market is still likely to remain rangebound and in essence lower for longer, relative to the price levels seen at the beginning of the year,” Ole Hansen, head of commodity strategy.
“Alternating focus between rising production and falling inventories could see WTI maintain a short-term trading range between $47-$50.5 per barrel,” Hansen added.
The US crude inventories are at their lowest since October, while the Opec rate of compliance with output cuts slid to 75 per cent in July, the lowest since the accord started in January.
