x
0
SCOTTRADE ACCOUNT IT'S TIME. It's time for an easier way to invest. Open a Scottrade Account
Apply Now

Haven Trades Fade As Yen, Treasuries Erase Gains

By Market Pulse (Dean Popplewell)Market OverviewApr 12, 2017 06:38AM ET
www.investing.com/analysis/haven-trades-fade-as-yen,-treasuries-erase-gains-200182427
Haven Trades Fade As Yen, Treasuries Erase Gains
By Market Pulse (Dean Popplewell)   |  Apr 12, 2017 06:38AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Wednesday April 12: Five things the markets are talking about

Despite safe haven flows remaining the prevalent market theme on geopolitical risks related to conflicts in Syria and saber rattling by North Korea, investors are shifting away from the worst of these levels as yen, U.S. Treasuries and gold erase their gains ahead of the U.S. open.

Note: Yesterday, the VIX had spiked to a two-week high, while U.S. 10’s tested a key long-term support of +2.30%, and the Nikkei was the worst performing major index on yen strength (both Nikkei and USD/JPY are at lowest levels since mid-Nov).

With limited fundamental data being released in the North American session, the market focus will be on the Bank of Canada’s (BoC) monetary policy announcement (10:00 am EST).

Dealer consensus expects the central bank to leave its benchmark interest rate unchanged (+0.5%), with Gov. Poloz expected to keep his focus on downside risks even though signs point to a Canadian economy that “maybe” coming to life.

Note: Many still argue that Canada’s economy is not as strong as the data would suggest, citing a recent setback in trade data and a household sector burdened with debt. Others argue that economic indicators, most notably job creation, point to an acceleration in growth.

1. Global equities produce mixed results

In Asia overnight, Japanese stocks fell to their lowest in more than four-months as rising geopolitical tensions in the region curbed risk appetite, with exporters badly hit as the safe-haven yen (¥109.35) spiked to a five-month high. The Nikkei 225 share average dropped -1.0%, while the broader Topix also fell -1%, led by declines in banks, autos and other exporters.

In Korea, the KOSPI rose +0.2%, after dropping -2% over the previous six-sessions. Down-under, Australia’s S&P/ASX 200 index gained less than +0.1%.

In Hong Kong, the Hang Seng China Enterprise (CEI) climbed +0.3% and the Hang Seng Index jumped +0.6%, wiping out earlier intraday losses.

In China, the Shanghai Composite fell -0.5% as data showed China’s producer price gains slowed in March from a peak in February, tempering the global inflation outlook (see below).

In Europe, equity indices are trading higher despite geopolitical tensions and the French Presidential election. Banking stocks are notably higher in the Eurostoxx, while mining stocks are trading lower in the FTSE 100.

U.S stocks are set to open in the black (+0.1%).

Indices: Stoxx50 +0.4% at 3,482, FTSE +0.4% at 7,396, DAX +0.4% at 12,183, CAC 40 +0.5% at 5,126, IBEX 35 +0.2% at 10,440, FTSE MIB +0.3% at 20,172, SMI +0.4% at 8,672, S&P 500 Futures +0.1%

Brent Crude Oil April 11-13 Chart
Brent Crude Oil April 11-13 Chart

2. Oil higher on compliance, gold atop five month high

Oil prices have rallied overnight, putting crude futures on track for their longest winning streak in nine month, as Saudi Arabia is reported to be lobbying OPEC and non-OPEC members to extend last Nov. production cut beyond the H1, 2017.

Brent crude futures are up +20c, or +0.36% at +$56.43 per barrel, while U.S West Texas Intermediate (WTI) crude futures are up +18c, or +0.34%, at $53.58 a barrel.

While compliance from some participants has been patchy, the Saudi’s have made significant cuts, with production down -4.5% since late 2016, despite a slight increase in March to +9.98m bpd.

The oil ‘bear’ remains concerned that markets are bloated and oversupplied. Official U.S production and inventory data will be published later this morning (10:30 am EST).

Political tensions and expectations of a cautious Fed (gradual rate rise) continue to support gold prices. After printing a nine-month high yesterday, the yellow metal has fallen -0.1% to +$1,273.70 an ounce ahead of the U.S open.

Gold April 11-13 Chart
Gold April 11-13 Chart

3. Global yield curves flatter

Uncertainty surrounding the French presidential election on April 23 continues to drive investors to sell French government bonds (OAT’s) and migrate cash into German government bonds and U.S. Treasury debt. The yield on French 10’s has backed up to +0.947%, while 10-year Bunds trade atop of their technically critical level of +0.2%.

Yesterday’s U.S Treasury +$20B 10-Year note reopening drew +2.332%. The bid-to-cover ratio was +2.48 vs. +2.66 prior. Indirect took +65.2% of competitive bids, with +26.4% were allotted at the high, while +5.3% go to direct bidders and +29.5% go to dealers.

The yield on U.S 10-year notes backed up +1 bps to +2.31%, erasing earlier declines. The rate dropped -7 bps on Tuesday.

Elsewhere, this morning Germany sold +€2.43B Feb. 2027 Bunds at an average yield of +0.21% vs. +0.41% on March 22. The bid-to-cover was +1.4 vs. +1.5.

USD/JPY April 11-13 Chart
USD/JPY April 11-13 Chart

4. Dollar pares losses, EUR contained, yen jumps

With safe haven flows remaining the prevalent FX theme, overnight price action saw yen (¥109.35) climb to its strongest level since mid-November before consolidating.

The pound (£1.2515) touched a one-week high ahead of this morning’s UK market data (see below). Thus far, GBP has been able to hold onto its gains as average wages (key focus of the BoE) beat expectations and saw higher back-month revisions.

Diminishing chances of a victory for far-right candidate Marine Le Pen in France’s presidential election is helping the EUR (€1.0604). However, expect that growing support for leftist candidate Jean-Luc Melenchon keeps alive French political concerns and tempers the ‘single’ unit’s gains.

Note: Volumes across the various asset classes are down in a week that’s shortened in many countries by Easter holidays.

GBP/USD April 11-13 Chart
GBP/USD April 11-13 Chart

5. China inflation soft, U.K wage growth slows

Data overnight showed China consumer inflation again remained “underwhelming” last month, as m/m CPI (-0.3% vs. -0.2%) fell for the second consecutive month in March and y/y was near its two-year lows below +1%.

Note: China’s official CPI target for 2017 is +3%.

Digging deeper, the food CPI component fell again by over -4%, while non-food rose slightly by +2.3% vs. +2.2% prior. Also, rising input costs continue to prop up wholesale inflation, with PPI up for the seventh straight month at +7.6% – close to consensus.

In the UK, average earnings after inflation in February for the first time in two and a half years, highlighting how rising prices fuelled by a weakened pound (£1.2500) are squeezing households’ spending power.

Average weekly earnings growth after inflation and excluding bonuses declined -0.4% on the month. Over the three months through February, earnings growth averaged +0.1%.

Note: Annual UK inflation is expected to exceed the BoE’s +2% target as a fall in the pound since June’s Brexit vote pushes up the cost of imports.

Daily Pairs Chart
Daily Pairs Chart

Original post

Haven Trades Fade As Yen, Treasuries Erase Gains
 

Related Articles

Haven Trades Fade As Yen, Treasuries Erase Gains

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

 
Are you sure you want to delete this chart?
 
 
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
 
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
 
 
 
Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Add Chart to Comment
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.