Crude Oil Surge On US Sanctions Report Dominates Asian Stock Trade

Asian Stocks Talking Points:

• Stocks were broadly lower Monday
• A spike in oil prices stoked broader risk aversion
• The US Dollar made gains, but commodity currencies did too

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Asian stocks put in a weak Monday showing in a holiday-thinned session which was really all about oil.

Crude oil prices rose on a Washington Post report saying that US Secretary of State Mike Pompeo is set to end sanctions waivers on entities which import crude or crude products from Iran. Some eight countries currently enjoy such license from Washington but it looks as though they will have to cease shipments.

This announcement could affect US trade relations with China and India, both key Iranian trade partners, along with more obvious allies like South Korea and Japan. In any event crude oil prices rose to new two-month highs across the board.

Stock markets in Australia and Hong Kong were out of action for the Easter holiday break; most functioning mainboards suffered from an oil-related bout of risk aversion with the Shanghai Composite down 1.4%, the Kospi off 0.3% and the Nikkei 225 doing much better but still a few ticks into the red.

The US Dollar held broadly firmer in thin trading, but commodity linked units like the Canadian Dollar got some support from oil. There was also some residual support apparent from last Friday’s better than expected US retail sales figures.

USD/CAD remains under gradual but clear pressure on its daily chart

Trade has been essentially rangebound through April but there now seems a clear risk of a bearish lower low on the chart, below those mid-March highs. For as long as they remain unchallenged focus will be rather on the lows of late February in the high $1.31 region. Gold prices inched upward but remained near four-month lows.

Given plentiful market closures still ahead for Easter Monday the economic data calendar is unsurprisingly light. US existing home sales are coming up along with the Chicago Federal Reserve’s national activity index. They will likely struggle for attention.

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--- Written by David Cottle, DailyFX Research

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