GENEVA — US equities remained resilient to escalating US-China tensions, but trading was mixed in Asia. The Nikkei (+1.00%) and ASX (+1.40%) extended gains, while Shanghai's Composite (-0.35%) and Hang Seng (-1.82%) slid for the second day as Hong Kong's special status came under scrutiny amid passing a new national security law that restricts rights and freedoms of its citizens. Further reviving worries was the US House vote to allow sanctions on Chinese leaders for human right abuses. Now there is a rising risk for a tit-for-tat reaction from Beijing, which could further hinder the trade relationship between the two countries. Meanwhile, coronavirus death toll hit 100,000 in the US. Officials and investors keep their expectations high for the discovery of a magic vaccine before the end of the year, but the only thing they can rely on for now is the stable decline of new cases and the absence of signs of a second wave of contagion. The S&P500 is now consolidating gains above the critical 3000 mark, at 12-week highs. The current levels will be a make or break for investors. If the market eagerness to carry the recovery higher is stronger than the temptation of realizing profits, we could see the S&P500 targeting the pre-COVID levels — which is strange per se knowing how bad the businesses were impacted by the COVID shutdown. But this precisely is the charm of the Federal Reserve (Fed) intervention. The massive asset purchases and near zero rates are clearly doing the trick. The S&P500 already recovered nearly 70% of COVID-led losses and the cheap liquidity environment gives a solid base for more recovery across the financial markets. In this respect, the asset prices are, and should continue diverging from their underlying valuations, however the market forces in place will remain favorable of a persistent rise in prices in the long run. US futures are up except Nasdaq, while activity in FTSE (+1.05%) and DAX (+1.26%) futures hint at further gains in Europe on Thursday. With the mix of unpromising international and economic news, however, the momentum is what risk investors rely on before the announcement of the US GDP data. A consensus of analyst expectations points at a 4.8% contraction in the first quarter, but risks are tilted to the downside. The US dollar is weaker across the board on the back of a resilient risk appetite, but a worse than expected US GDP read could change the appetite for dollar. Demand in other safe haven assets, such as US treasuries and gold, remains solid. It is better to be prepared against an eventual risk sell-off than being caught unhedged — this is what the activity in gold tells us. Gold finds decent dip buyers below the $1,700 per oz and is set to return to its safe zone, near the $1,725/oz. The USDJPY doesn't gather the necessary strength to push above the 108 mark, and the USDCHF consolidates below 0.97. The EURUSD cleared the critical 1.10 offers and advanced to a nearly two-month high. In her speech yesterday, the European Central Bank (ECB) President Christine Lagarde warned of a ‘medium' or ‘severe' recession scenarios, which could cause 8 to 12% contraction in European economies this year. Lagarde's dovish stance and a broad-based decline in US dollar gave a boost to the euro, but the upside potential will likely remain limited by the ECB skeptics and the 1.10 handle should not provide a solid support to the single currency. A slide below the 1.10 mark is highly likely. On the topside, offers are eyed into the 1.11 mark, the April – May positive trend ceiling. Also, Lagarde said there will be no new euro debt crisis after the pandemic, whereas massive fiscal packages deployed by governments to fight the coronavirus-led economic damage is already being a matter of major controversy among European economies and a worry for the long-term euro outlook. Cable remains offered near its 50-day moving average (1.2350). WTI crude, on the other hand, retreated below $32 per barrel, after running into a brick wall near the $35 mark. A gradually improving global demand and limited supply will likely give support the global oil market. Oil traders will be watching the weekly US oil inventories data today. A third consecutive weekly decline in US inventories should throw a floor under the WTI's downside correction within the $32/30 area. But it is worth noting that this week's data, even favorable, could have a softer positive impact on oil prices compared to the previous two weeks, when the unexpected inventory declines caught investors by surprise. This may not be the case this week. The market expectations are now adjusted to the downside and the current prices already reflect a lower supply dynamic. This being said, the expectation is a 2.5-million-barrel decline, versus last week's minus 5-mio-barrel print. There is still room for a negative surprise. However, an unexpected positive read could further dent the mood and encourage a deeper dive toward, and possibly below the $30-support. — The writer is senior analyst at Swissquote Bank