The hard reprisal usually occurs in the final act when all the mysteries are revealed.

A choppy session overnight, US equities waxing and waning through gains and losses before ultimately slipping lower in the last hour of trading, S&P500 closing 0.7% lower. There was little concrete news to drive sentiment, but the scrim was thick with trade war innuendo.

Oil fell back on profit-taking ahead of critical China trade data while NFP looms ominously on the horizon.

Given oil markets’ high level of sensitivity to negative news, this week’s rally is showing signs of petering out as its unlikely either critical data point is going to present investors with a bundle of joy.

Investors are struggling to gauge how the gradual restarting of activities plays out.

But the sentiment appears to be shifting lower as the scope of shutdowns and travel restrictions are giving rise to economic uncertainty, which is gradually retaking hold even more so ahead of what’s bound to be a dreary NFP report on Friday.

As even today, the downward revisions in estimates for April US payrolls continue to roll in. So, the markets veneer is looking a lot less glossy heading into the US employment data.

There have been more back-and-forths between the US and China overnight, which has likely weighed on US equities, and sentiment remains thick with caution in early Asia trade. And with markets treading water shifting to and fro between reopening optimism and Trump’s trade rants, it is hard to keep one’s nerve in the game.

But it seems clear that traders are beginning to dust off their trade war playbook as USDCNH lurched higher in early Asia trade. But it’s virtually impossible to get a read on these proceedings given Trump’s proclivity to walk his trade aggressions back.

And therein lies the problem, the hard reprisal usually occurs in the final act when all the mysteries are revealed.

Gold retreats

Gold retreated on the lockdown easing narrative and USD gains as markets are having difficulty getting traction above USD1,700/oz this week.

Gold traded more or less in sideways fashion so far this week with a downwards lean.

Both US and European equity markets struggled for direction but with a downward bent. But did not elicit much of a rise from gold investors, which suggests the US dollar is successfully competing for haven flows.

In the near-term gold may come in for some further pressure. But with interest rates so low, there is probably a limit to how far gold can fall, even in the case of an end to lockdowns.

India’s services PMI plunged to 5.4 in April from 49.3 in March, while European data offered similarly downbeat signals.

But gold investors appear less concerned with data beats and misses and more focused on optimism around reopening’s, which continues to paper over the dreary economic scrim where the reality is that the downward leg of any V-shaped recovery is proving deeper than expected. All of which should support gold over the medium term.

As trade war becomes more prominent in the market discussion, so will the need for gold.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp