Brexit Fears, Oil Price Woes and Equities Volatility Present Traders with the Perfect Storm…

Global markets are once again faced with an unenviable set of circumstances with high levels of volatility plaguing equities across the board. Pervasive weakness in China continues to dominate the scene, with equities facing collateral damage from the fallout. Oil price fluctuations are closely correlated with equity prices, and major averages continue to move in sync with the price of black gold. Recent efforts at stabilising the oil price between OPEC and non-OPEC countries have succeeded in raising the price somewhat, but equities volatility remains. The Lunar New Year in China ushered in some good fortune for the beleaguered steel industry which is now on the up and up, with iron ore prices hitting $50.30 per tonne, and helping major mining companies such as BHP Billiton (BHP), Anglo American (NGLOY), Rio Tinto plc (RIO) and others to rally.

However, commodities brokers caution that this may be nothing more than a pyrrhic victory for miners as the instability in China and emerging market economies runs deep. The more pressing concern for traders is the upcoming June 23 referendum in the United Kingdom about British membership of the European Union. Brexit fears are real, and the no vote contingent has significant clout in the UK. We have seen the GBP sinking to its lowest levels in 7 years +, and the FTSE 100 index reflects the sentiment. In Asia-Pacific, the Japanese yen has clawed its way back against the USD, as has the Canadian dollar, but the USD is slated to appreciate by the end of 2016 and be trading at parity with the euro. There are several bright spots on the horizon, with gold gaining substantially for 2016, and some analysts even calling for the precious metal to be trading at $1,400 an ounce by the year’s end. It is against this backdrop that we examine the 4 financial assets to trade this week.

1 – Commodities: Consider Call Options on Gold