ZFX: Cautious sentiment arises amid the uncertainty of UK-EU talks

Asian stock markets are mixed on Monday, while Japan, Hong Kong and Mainland China markets are a bit bearish. Last week, with the hopes of the US stimulus and vaccine development, a record setting of Wall Street has been made. All three major indexes stood at the record high due to the improved investor sentiment.

European stocks are expected to open lower as well, following the momentum of Asian session. The market focus now is the UK-EU talks over the Brexit trade deal, weighing on the risk appetite. ZFX analyst Jacob Leung said that the markets are quite “struggling” despite the bullish move in the US session last Friday. “Hard Brexit” would likely be the key uncertainty this week.

It is reported that the UK and the EU will make last efforts to negotiate the trade deal this week, probably on Monday and Tuesday. However, it is not that optimistic that those conflicts like fishing rights and competition rules remain unsolved.

Gold price was good last week due to the weakness of the dollar. Even though there was the profit taking sell-off last Friday, spot gold is still trading at the recent high level over $1830. The UK-EU talks, hope of the US fiscal stimulus, the weakness of the dollar and the NFP, were together driving up the safe haven demand in gold market.

The slowdown of the labour market in the US seems to be a very important signal to the US Congress. The pandemic is continually affecting the economic recovery these months despite the optimism over coronavirus vaccines, which is on the other hand putting pressure on those lawmakers. This week, the Congress is targeting to reach the $908 billion bill.

Traders are betting on the “pass” of new fresh stimulus, sparking overall risk appetite. The dollar is turning to be bearish against riskier currencies last week, broken 91 level already.

Oil prices were under correction after the surge last week, mainly boosted by positive news from OPEC+. Of course, the further closer to the launch of vaccine will continually support the oil market. Also, investors are now expecting the stimulus package from the US Congress, which is another potential rally of the oil market, despite some more “lockdowns”.