Market Morning: Weekend Massacres, Iran Strikes Again, US Blames China, Gold & Bitcoin Pop

Market Morning: Weekend Massacres, Iran Strikes Again, US Blames China, Gold & Bitcoin Pop

29 Murdered Over the Weekend in Two Shooting Attacks

It was a terrible weekend in the United States as two separate shooting attacks occurred less than 24 hours apart. The first occurred in a Walmart (NYSE:WMT) in El Paso, Texas, where a 21-year-old shooter murdered 20 people. He has been apprehended by police. He had issued a manifesto, blaming his actions on what he called the “Hispanic invasion of Texas”. Less than a day later, a copycat shooter opened fire at a night scene in Dayton, Ohio, killing 9 people and injuring 26. Police responded and neutralized the shooter, who is now deceased. No motive has been identified in the second case, and the shooter’s identity has not been released.

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These shootings are likely to reignite the gun control debate, and gun stocks are also likely to make a move with heavy trading volume when Wall Street opens for the week. Stocks to watch include Sturm, Ruger & Company, Inc. (NYSE:RGR), Vista Outdoor (NYSE:VSTO), and American Outdoor Brands (NYSE:AOBC)

Iran Seizes Another Oil Tanker

Iranian forces have seized another foreign oil tanker in the Persian Gulf. It was transporting oil to Arab states. Seven crewmen have been detained according to Iranian state media. There is some confusion as to when the seizure occurred, with Iran only reporting it on Sunday, but Lebanese media claiming the tanker was taken into Iran’s custody back on Wednesday.  “The IRGC’s naval forces have seized a foreign oil tanker in the Persian Gulf that was smuggling fuel for some Arab countries,” said Islamic Revolutionary Guard Corps commander Ramezan Zirahi. The tanker was carrying 700,000 liters of fuel.

Oil was trading in wild swings last week amid news of a Federal Reserve rate cut but with conservative overtones downplaying future cuts, and the imposition of new tariffs against Chinese imports to the United States by President Donald Trump. Oil (NYSEARCA:USO) rose 1.5% on Friday but was still down for the week after steep declines last Wednesday and Thursday.

Kettle, Pot Alert: US Accuses China Of Destabilizing Trade

China is destabilizing the Indo-Pacific in the opinion of U.S. Defense Secretary Mark Esper. In another sign that the Trump Administration is preparing a tough stance in the ongoing trade war with China, Esper accused China of “predatory economics, intellectual property theft and weaponizing the global commons”. Since the Defense Secretary can hardly say anything of consequence without the permission of the White House, it can be assumed that the comment is calculated to provoke the Chinese either into capitulating out of fear, or exacerbating the trade war, allowing Trump to unleash even more tariffs, which he seems to be quite a fan of.

“We firmly believe no one nation can or should dominate the Indo-Pacific and we are working alongside our allies and partners to address the region’s pressing security needs. We also stand firmly against a disturbing pattern of aggressive behavior, destabilizing behavior from China,” said Esper.

Meanwhile, Asian stocks had quite a bad day on Friday, as did popular U.S. stocks like Apple (NASDAQ:AAPL) that could lose a lot of money through lower sales on the back of increased tariffs. The basic logic being that there is only a finite amount of wealth in the world, and if more of it goes to the government through tariffs, then less of it goes to people, meaning they can buy fewer iPhones and such. The more comments along these lines, the more likely we are headed into volatile trading among the companies caught in the trade war crossfire. Try to tell that to President Trump.

Car Prices Remarkably Steady, RV Prices Buck Trend

The most recent rate cut by the Fed should help alleviate nascent pressures on the US automobile industry. One of the biggest systemic threats to it is a sustained rise in interest rates that would make financing new car purchases very difficult, and could force sales prices down for new cars, but up for used cars. Still, since 2010, car prices have been remarkably stable since 1997, falling for more years than they rose, year over year. The average price for a Ford (NYSE:F) and a General Motors (NYSE:GM) Chevrolet have risen slightly over the past decade, but prices for the average Honda (NYSE:HMC) and Toyota (NYSE:TM) have fallen, evening out the overall index.

However, RV prices are starting to fall again for the first time since 2009. They had fallen for 3 years straight from 2007 to 2009, and before that, in 2000 and 2001. The change in the trend of prices in the automotive industry clearly has a different curve than RV prices in the United States. Does this mean anything for the economy? Possibly. Wait and see.

Gold, Bitcoin Pop On Economic Worries

Gold had quite a volatile week on the back of trade war news, bouncing back and forth in a $55 trading range between $1,412 and $1,462 an ounce. The Fed’s earlier rate cut on Wednesday saw gold initially pop higher, then sell off in a strong profit-taking event as the Fed’s words were taken at face value, which was that any further rate cuts were unlikely outside of a severe economic downturn. Then, with China trade war news flaring up again, gold quickly jumped right back up above $1,450 as fears of an economic downturn persisted, which would force the Fed to lower rates. Physical gold holdings in the iShares gold ETF (NYSEARCA:IAU) have reached new records.

Bitcoin (BTC-USD) meanwhile also had a good week, establishing what could be an intermediate double bottom at around $9,500. Bitcoin prices were up over 11% last week, and could be reflecting similar sentiment being felt in the precious metals markets.

What is particularly interesting now is that the Bitcoin/gold debate could be hitting a crossroads between now and the next few months. Of those who generally distrust the current monetary system, the millennial generation looks to fall firmly on the side of Bitcoin, while Boomers tend to side with gold. An impending no-deal Brexit, which has become much more likely since the election of Boris Johnson, could upend the European Union which is suffering from a severely strained financial system and ailing banks, and negative interest rates across the continent making loan profitability very difficult. Put this in the context of the worsening trade war with  no signs that tariffs will be let up any time soon, and we could see a flight from the dollar into both Bitcoin and gold.