• Escalating US-N.Korea tensions weigh on European stock indices
  • US stocks are also lower but holding up better for now 
  • Oil pulls back from highs despite DOE draw
  • RBNZ set to announce latest policy mix tonight (10PM)
  • Grains subdued heading into WASDE report

The Asian session and European morning was dominated by the latest escalation in tensions between North Korea, with both sides swiftly ratcheting up their rhetoric to unprecedented levels. US President Trump told a reporter last night that any further threats to the US would be met with “fire and fury” and within a matter of hours North Korean state media was reporting that Pyongyang are considering an attack on Guam – a US pacific territory where an air base is located.  

European stock indices ended their cash session with sizable gains after the rising tensions between the US and North Korea have seen investors pull out of some risk assets. The DE30 fell over 100 points in the morning session but recovered somewhat after the Wall Street open.

Compared to their European peers, stocks on the other side of the Atlantic are faring relatively well. Equities in the US have enjoyed an incredible run higher of late with the US30 leading the charge in making 10 consecutive higher closes. This run was broken on Tuesday however, and with an inverted candlestick being printed there is at least a point of reference for some possible resistance at 22130. 

The weekly crude oil inventories from the Department of Energy (DOE) showed a decline of 6.5M barrels in the headline reading, below both the -2.6M expected and the -1.5M seen previously. Despite this drop in the headline DOE number the price of Oil has fallen since the release and this could be due to the relative rise in the figure when compared to last night’s API reading of -7.8M. Furthermore a closer look at the components in the report reveals a substantial increase in gasoline inventories compared to the consensus expectations. The weekly gasoline inventory change was +3.4M compared to a -1.5M expected and this further detracts from the drop in the headline reading. 

Today’s RBNZ decision (10pm BST) could be the most important calendar event this week on the markets. The Bank will not only decide on rates but will also issue it’s quarterly monetary policy statement (MPS). This may have far reaching implications for the NZD and this could be one market to keep an eye on overnight. 

Finally, all major grains have been traded relatively low after making a wild increase earlier, a marginal rebound has taken place lately though. Bear in mind that the WASDE report presenting many fundamental metrics for grains is expected to come in on Thursday. Besides, there were a few noteworthy readings published on Monday which had rather an equivocal impact on prices.