It is shaping up to be a dull day for financial markets with equities across the world struggling for direction due to a lack of fresh catalysts.

Stocks in Asia witnessed another muted session today as many markets in the region remain closed for the Lunar New Year holiday. In Europe, shares got out of the wrong side of the bed thanks to weak earnings from French banking group BNP Paribas and disappointing data from Germany. While Wall Street has the potential to extend gains this afternoon on strong corporate earnings and cautious optimism over US-China trade talks, the medium- to longer-term outlook for equity markets tilts to the downside. Concerns over slowing global growth remains a dominant theme while the unpredictable nature of trade negotiations has certainly left investors on edge. With other geopolitical risks such as Brexit, China’s slowdown, Eurozone growth concerns and political turbulence in Washington seen stimulating risk aversion, the ingredients are in place for a stock market sell-off.

Investors who were expecting fireworks and action from US President Donald Trump’s State of the Union address were left empty handed after nothing new was brought to the table. While Trump discussed trade relations with China, border security and the budget, this was of no real interest to markets and such was reflected in the muted reaction. With Trump failing to provide fresh insight into the progress over US-China trade talks and the March deadline looming, sensitivity to trade developments is poised to heighten moving forward.

Brexit uncertainty and growing pessimism over Theresa May’s ability to secure further concessions from the EU continues to weigh the Pound. With the European Union already stating that the Withdrawal Agreement is “not open for re-negotiations” it will be interesting to see what the prime minister achieves from her trip to Brussels. While negativity over Brexit is likely to continue punishing the Pound in the short term, the currency could receive a boost if expectations mount over the government delaying Brexit by extending Article 50. Although the Bank of England policy meeting is on Thursday, we expect the Pound to offer a muted reaction to this risk event as Brexit continues to overshadow economic fundamentals.

In the commodity markets, Gold is trading lower today thanks to an appreciating Dollar. While the precious metal is seen extending losses in the near term, bulls still remain in control in the medium to longer term. For as long as global growth fears weigh on market sentiment and expectations mount over the Fed taking a break on rate hikes this year, Gold will continue shining. Focusing on the technical picture, the precious metal has the potential to rebound towards $1,320 if $1,308 proves to be reliable support. A breakdown below $1,308 is likely to invite a decline back towards the psychological $1,300 level.

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