European markets look set to start the new session on the front foot, after the US managed to book a positive close and Asia traded higher overnight. This is a quick turnaround in risk appetite given the gravity of the actions by North Korea just 36 hours earlier.
A more measured response from Trump
Following a ballistic missile launch by North Korea over Japan, investors quickly moved out of riskier asset classes and increased flows into safe havens. However, a noticeable difference between yesterday’s growing geopolitical tension compared to the tensions at the beginning of the month, has been US President Trump’s response. The response from the US President, has been far more measured this time round than following provocation from North Korea a few weeks ago. However next steps remain unknow. The US no doubt still favours a diplomatic resolution but Kim Jong Un appears set on waving the red rag at the often hot headed bull.
Europe to open higher but euro strength could weigh on mainland bourses
The measured response from Trump has provided investors with a state a calm nativity, the gravity of the situation shouldn’t be ignored, this is isn’t just a missile test, but one over a neighbouring country. That aside, the rebound in the US has meant a positive start for Europe is on the cards, although bourses on the mainland could still remain under pressure given recent euro strength; the single currency emerged as the preferred safe haven currency given the parties involved in the potential North Korean conflict. The Dax is trading below its 200 MDA for the first time this year and has dropped below 12,000 for the first time in 5 months. Meanwhile safe havens still remain supported with gold firmly above the psychological barrier of $1300 which it broke through following the missile.
Tropical Storm Harvey
As Texas continues to be battered by Tropical storm Harvey, some estimates have put the cost of damage at around $20 billion, making Harvey one of the 10 most costliest storms in US history. The impact on the energy markets has been extensive. US gasoline futures surged 3.5% on Tuesday, after having been as much as 6.8% higher on Monday evening. US crude futures sunk 3.4% to $46.25 as the storm closed oil refineries down, the main consumers of crude oil. Going forward, oil could continue under pressure until there is more clarity as to the extent of the damage done to the refineries, and some indication as to when they could reopen.
US data to shift the focus of the market?
Other key events for the US include the latest revision to the US GDP and the US ADP employment figures. Should some positive news trickle in regarding the US economy, particularly on the jobs front ahead of Friday’s Labour report, then we could see investors shift their attention away from natural disasters and geopolitics and return to their favourite game of Fed watching and interest rate policy guessing, ahead of the Federal Reserve meeting in September.
A word about Apple
As the long-awaited date for the new Apple product launch nears, investors seem unable to contain their excitement. With just two weeks to go, hype and expectations surrounding the new Apple devices has pushed the world’s most valuable company to new highs. Apple shares hit a record intraday and closing price, with an increase of 0.9% across last night’s session to close at $162.9. Apple now has a market cap of over $840billion thanks to the 40% increase in its share price over the last 9 months. But can this last?
Not only are Apple expected to launch a series of devices that include a brand-new anniversary edition iPhone and a newer version of the smart watch, but the firm surprised the markets with an announcement of a new partnership with Accenture. The consumer has always been a central part to the Apple business model, but this new partnership points towards Apple’s increased attention on businesses, which could offer support should the current consumer addition to Apple products calm down.
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