Geopolitical issues dampen investor confidence

It was mainly geopolitical issues that investors were focused on in overnight trading as markets in the US and Europe stalled after a particularly bullish end to last week in the US.

The Dow fell 0.1% to close at 21,184 points, and there was a similar proportionate decline in the NASDAQ as it closed at 6295 points.

There was also an absence of any significant stock-specific news which tightened the focus on developments such as terrorist attacks and the upcoming UK election.

Uncertainty in the US could emerge as former FBI Director James Comey prepares to comment on issues that occurred prior to being sacked by President Trump. The extent of the Trump administration’s dealings with Russia and their possible interference in the presidential election are issues that could prove unsettling.

European markets were also soft with the FTSE 100 coming off 0.3% to close at 7525 points.

There was a holiday in Germany, but positive manufacturing data could see the DAX open strongly tonight.

The Paris CAC 40 shed nearly 0.7% to close at 5307 points.

It was a poor night for commodities with oil, iron ore and base metals all trending lower. Gold was the only shining light, but even it pulled back from an intraday high of US$1286 per ounce to close at $1282 per ounce, a gain of only 0.1%.

While a better performance could be expected for gold, given global volatility and a likely increased interest in safe haven investing, it should be remembered that the precious metal is up approximately $20 per ounce since June 2.

The oil price slipped below US$47.00 per barrel at one point, before rallying late in the day to close at US$47.39 per barrel, representing a decline of nearly 0.6% compared with the previous day’s close.

The iron ore price was hit hard, falling 3.3% to close at US$55.90 per tonne.

All base metals finished in negative territory with zinc being the worst hit, falling approximately 1.5% to close at US$1.11 per pound.

This could be viewed negatively by technical analysts as there appeared to be a level of support in the vicinity of US$1.13 per pound. Zinc hasn’t traded at these levels since October 2016.

While there has been a slight tapering in the accelerated decline in LME zinc warehouse stocks that has occurred over the last three weeks, it doesn’t appear indicative of any significant change in the supply/demand dynamics for the metal.

Copper fell slightly to US$2.54 per pound. Nickel only came off marginally to close at US$4.02 per pound, and lead was also little moved at US$0.94 per pound.

The Australian dollar has strengthened since Friday, increasing from circa US$0.738 to US$0.748.

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