Commenting on today’s trading with a focus on Kurdish forces fighting with the Turks, Gorilla Trades strategist Ken Berman said:
While trading activity was light due today’s bank holiday, stocks remained stable in the face of the disappointing trade developments, which is a bullish sign for the rest of the week. Treasury yields ticked lower after the Chinese statement proposing further talks before signing Friday’s deal, but equities barely budged, and the major indices are still close to their all-time highs thanks to last week’s rally.
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Focus on Kurdish forces in today's market
The major indices edged lower today following two bullish sessions, as the enthusiasm concerning the prospect of a partial trade deal with China waned. The Dow was down 29, or 0.1 %, to 26,787, the Nasdaq lost 8, or 0.1%, to 8,049, while the S&P 500 fell by 4, or 0.1%, to 2,966. Decliners outnumbered advancing issues by an almost 2-to-1 ratio on the NYSE, where volume was well below average.
The key sectors were mixed throughout today’s quiet session, and the better-than-expected European and Chinese economic numbers supported equities ahead of a crucial week of U.S. releases. The recently leading defensive utilities sector remained under pressure, suggesting that last week’s risk-on shift might finally be a sustained one. After more than two months of volatile consolidation, the major indices could be ready to target their all-time highs again, although the global political landscape remains risky.
Turkey crisis
The Syrian civil war entered a new phase last week, as the Turkish army entered the country’s territory to establish a safe zone in the area currently controlled by Kurdish forces. The U.S. administration announced the withdrawal of its forces from the region, and now, a new conflict between the Turkish and Kurdish armies might be ahead. As the Syrian government also entered the disputed area to assist the Kurdish forces, the crisis in the war-torn country could continue, and the geopolitical risk could weigh on global risk assets.
The Trump administration announced sanctions against Turkey today, demanding the end of the military operations, which caused a dip in the Turkish lira and local stocks. Besides the Syrian situation, the Brexit saga will likely have a major impact on financial markets this week. Even though the odds of deal between the U.K. and the European Union (EU) increased last week, the October 31 is getting dangerously close, and the two sides should find a solution that the British Parliament approves of this week.
From Kurdish forces to ECB
While the most anticipated economic reports will come out in the second half of the week, we will have the Empire State Manufacturing Index coming out before the bell tomorrow. Several important European indicators will be out overnight, while two FOMC members will give speeches during the day as well. We could have details about the recently announced expansion of the Central Bank’s balance sheet, and, in light of the recent negative economic releases, a dovish shift in the Fed’s stance wouldn’t be a surprise either. Stay tuned!
