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Recession fears hit stocks

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North American stock markets sustained heavy losses with U.S. markets posting their worst start to October in more than a decade on growing fears of recession.

The S&P/TSX composite index closed down 136.69 points at 16,310.97.

In New York, the Dow Jones industrial average was down 494.42 points at 26,078.62. The S&P 500 index was down 52.64 points at 2,887.61, while the Nasdaq composite was down 123.44 points at 7,785.25.

The Canadian dollar traded for an average of 75.22 cents US compared with an average of 75.51 cents US on Tuesday.

The November crude contract was down 98 cents at US$52.64 per barrel and the November natural gas contract was down 3.6 cents at US$2.25 per mmBTU.

The December gold contract was up US$18.90 at US$1,507.90 an ounce and the December copper contract was up one cent at US$2.57 a pound.

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China economy takes another trade war hit

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Fallout from the trade war with the United States has dealt another blow to China’s slowing economy.

Imports and exports fell more than expected last month, official data published by the General Administration of Customs on Monday revealed.

Globally, exports from the world’s second-largest economy dropped 3.2% in September from the same period last year while imports dived 8.5%.

The figures were worse than expected and were released just days after a “mini trade deal” between China and the US was agreed at the end of last week.

“The mini US-China trade deal reached on Friday doesn’t alter the outlook significantly,” Martin Lynge Rasmussen, a China economist at consultancy Capital Economics, said in a note.

“Looking ahead, exports look set to remain subdued in the coming quarters. Meanwhile, import growth has slowed sharply in recent quarters and now looks unusually weak relative to economic growth. A partial rebound in headline import growth is therefore likely in the near term,” he added.

To illustrate the impact of the 15-month long dispute, the European Union has now replaced the US as China’s top trading partner amid a bruising tariffs conflict.

Engulfed in an impeachment inquiry, US President Donald Trump heralded the deal as a major breakthrough.

Imports from the US plunged by 26.4% last month compared to the same period in 2018. The trade surplus with China also narrowed 3.9% to US$25.8 billion in September from $26.9 billion in August.

On Friday, a shaft of light did appear to pierce the gloom when China promised to increase US agricultural purchases in a partial Sino-US agreement, which also includes safeguards for intellectual property rights and a further opening up of financial markets.

Engulfed in an impeachment inquiry, US President Donald Trump heralded the deal as a major breakthrough.

But it may only offer a temporary tariff reprieve because it lacks specifics and leaves the thorny issues such as unfair state subsidies until future negotiations.

“The external environment facing China’s foreign trade development is still complicated and severe. Instability and uncertainty are increasing,” Li Kuiwen, a spokesman for the General Administration of Customs, told a media briefing.

So far, Washington and Beijing have imposed punitive tariffs covering more than $360 billion worth of goods in two-way trade.

This, in turn, has slowed the world’s two largest economies.

For China, the downturn has continued across a broad range of sectors, from retail sales to industrial output, which plunged to a 17-year low in August. Big-ticket items such as new car sales have stalled while residential property prices have also suffered as consumer debt increased.

Last week, figures showed that the services sector grew at its slowest pace in seven months in September. The Caixin/Markit PMI fell to 51.3, the weakest since February, compared to 52 in August. But it still stayed above the 50-point mark, which separates expansion from contraction.

“China’s economy showed signs of marginal recovery in September,” Zhong Zhengsheng, the director of macroeconomic analysis at CEBM Group, said in a statement. “However, the rising costs of labor and raw materials restrained business confidence.”

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Gold, silver gain as geopolitical worries resurface

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Gold and silver prices are moderately higher in midday U.S. trading Monday, on some safe-haven demand as trader and investor risk aversion is a bit keener to start the trading week. December gold futures were last up $7.10 an ounce at 1,495.80. December Comex silver prices were last up $0.116 at $17.66 an ounce.

The shine of last Friday afternoon’s U.S.-China “Phase 1” trade agreement has quickly worn off. After having the weekend to ponder the matter traders and investors now reckon the agreement is fraught with potholes that are likely derail it. There are now reports China wants more talks before even signing the Phase 1 agreement. “The devil is in the details,” as the saying goes.

Also, the optimism expressed late last week regarding a U.K.-European Union agreement on Brexit has dimmed.

There was more dour economic news coming out of China to start the trading week. China’s exports to the U.S. dropped 22% in September, year-on-year. China’s total exports fell 3.2% in the month. China’s total imports in September were down 8.5%.

All of the above are producing some new safe-haven demand for the gold and silver markets.

Nymex crude oil prices are solidly lower and trading around $53.00 a barrel today. The other key “outside market” sees the U.S. dollar index moderately up in midday U.S. trading.

There were no major U.S. economic data released Monday, as banks and the U.S. government are closed for the Columbus Day holiday.

Technically, December gold futures prices were near mid-range at midday today. The bulls have the overall near-term technical advantage but a five-week-old downtrend is still in place on the daily bar chart. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the late-September high of $1,543.30. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at the October low of $1,465.00. First resistance is seen at Friday’s high of $1,508.00 and then at $1,520.00. First support is seen at today’s low of $1,487.10 and then at last week’s low of $1,478.00. Wyckoff’s Market Rating: 6.5

December silver futures were nearer the session high at midday today. The silver bulls have the overall near-term technical advantage. However, a five-week-old downtrend is still in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $18.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the October low of $16.94. First resistance is seen at last week’s of $18.00 and then at $18.25. Next support is seen at last week’s low of $17.305 and then at $17.00. Wyckoff’s Market Rating: 6.0.

December N.Y. copper closed up 15 points at 262.95 cents today. Prices closed near the session high and closed at a three-week high close today. The copper bears still have the overall near-term technical advantage. Copper bulls’ next upside price objective is pushing and closing prices above solid technical resistance at the September high of 270.65 cents. The next downside price objective for the bears is closing prices below solid technical support at the September low of 248.20 cents. First resistance is seen at last week’s high of 263.85 cents and then at 265.00 cents. First support is seen at today’s low of 259.40 cents and then at 257.50 cents. Wyckoff’s Market Rating: 3.0.

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MasterCard, eBay join PayPal in exiting Facebook cryptocurrency Libra

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Visa and MasterCard on Friday announced their departure from Facebook’s Libra project, a potentially fatal blow to the social network’s plan for a worldwide digital currency.

Along with the two payment giants, several other large companies have said they’re exiting Libra. Payment processing company Stripe said it is stepping back, as well as online auction company eBay.

PayPal was the first of Libra’s big partners to leave, announcing last week it would no longer be involved.

Facebook faced substantial criticism over its plans to create a separate, private currency system to allow cross-border payments. The Libra Association, based in Switzerland, was supposed to give the currency project a comfortable arm’s length distance from Facebook, which wouldn’t own Libra.

Despite those efforts, financial regulators, as well as members of Congress on both sides of the political divide, noted the privacy issues raised with the social networking company controlling a currency, while also expressing concern about money laundering. Even U.S. President Donald Trump tweeted that Facebook should be subject to U.S. banking laws if the Libra project were to move forward.

The impact of Libra’s loss of Visa and MasterCard cannot be understated. The two hold an effective duopoly over credit and debit cards in the U.S. and Europe, and are making substantial inroads into developing countries’ payment systems. Their initial agreement to join the Libra Association instantly gave Facebook’s project legitimacy.

But both companies made it clear from the onset that their interest in Libra was at least partly out of curiosity. It now appears that the political pressure on Facebook to drop the project was enough to convince a chunk of the original members to cut ties.

The Libra Association said in a statement that it is “focused on moving forward.”

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