Traders Remain Cautious as Tensions Mount

Asian stocks retreated on Tuesday despite a continued rally on Wall Street as trader showed renewed caution when approaching the markets. The Nikkei 225 was down a modest 0.09 percent as of 1:29 p.m. HK/SIN, while Hong Kong’s Hang Seng Index was down 0.90 percent. Australia’s ASX 200 shared the trend, trading down 0.47 percent and the Kospi was down 0.64 percent. Weighing on markets was the trade struggle between the United States and China which still shows little sign of a quick resolution.

U.S. President Donald Trump said over the weekend that he was inclined to help struggling Chinese technology company ZTE which has been damaged by U.S. sanctions, lending optimism which helped U.S. indexed head higher. Nevertheless, on Tuesday U.S. Ambassador to China Terry Branstad said that Washington and Beijing are still “very far apart” on trade issues, erasing the rumblings of optimism sparked on Monday. Both countries have proposed tariffs that can harm the other country’s economy if implemented, and the tariffs remain a looming threat for the global economy.

Oil Heads Higher

Oil prices headed higher on Tuesday as traders once again showed their concern about tensions in the Middle East and Iran. U.S. WTI futures were up 1 cent per barrel to $70.97 per barrel and Brent crude futures were up 4 cents per barrel to $78.27 per barrel. In a new warning published by CNBC on Tuesday, Citibank voiced its concerns that rising oil prices, coupled with weaker-than-expected global economic growth, could pressure stock markets and increase risk for stock traders.

President Trump’s withdrawal from the Iran nuclear deal could trigger stagflation, warned the global strategy team at Citi. Stagflation is the combination of slow economic growth and increasing inflation, a coupling which could create problems for risk assets. For the moment, the increased volatility can present market opportunities for CFD traders, but traders should proceed with caution.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.