Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Opening Bell: Risk-Off Returns Via UK Terror, Trump Investigation

By Investing.com Market OverviewMay 23, 2017 07:09AM ET
www.investing.com/analysis/risk-off-again,-on-trump-investigation,-and-possible-uk-terrorism-200190758
Opening Bell: Risk-Off Returns Via UK Terror, Trump Investigation
By Investing.com   |  May 23, 2017 07:09AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

by Pinhcas Cohen

The Big News

As the investigation into last night's suicide bombing in Manchester, UK continues, Asian and European markets either fell or remained flat. Investors’ can’t seem to catch a break, as the risk-on, risk-off roller coaster keeps chugging along.

At the same time, short-term traders also can’t get a break, but are finding opportunities where they can as these wild swings provide them with a target-rich environment for investments.

World Events

The blast that killed at least 22 people and injured 59, including children, at an Ariana Grande concert in Manchester has been confirmed as the worst terror attack in the UK since the 7/7 bombings in 2005. UK Prime Minister Theresa May has suspended her party's campaigning for the day as a result.

The attach has had a detrimental affect on the markets as well, with traders' risk tolerance sinking to new lows.

In the latest development from the ongoing investigation into President Donald Trump's administration's ties to Russia, the Washington Post has reported that the President had asked intelligence officials to make public statements indicating that there was no evidence of Russian involvement with his election campaign.

USD/JPY 5-min Chart
USD/JPY 5-min Chart

In consequence, the yen advanced against almost all FX majors, proving again it's the safe haven currency of our time, gaining 0.23%, whereas the Swissy has lost 0.2%, as of 3:04 EDT.

Gold Futures Chart- Daily
Gold Futures Chart- Daily

Not that the yen was the only asset doing well. Gold surpassed the yen; its value rose 0.4%. Treasury bonds have gained the most value, particularly the US 5-year. Its yield declined by 1.20% to 1.7769.

U.K. 2-Year Bond Chart
U.K. 2-Year Bond Chart

However, the big safe-haven winner – or loser in yield – is the UK 2-year Government Bond, whose yield dropped 0.83 basis points, or 20.16%, and is extremely volatile. This exceptional demand for UK bonds is a direct result of this most recent terror attack in Manchester.

Asian markets and European and US futures are in the red, with the exception of the open Swiss and Dutch markets, which are in the green. Also, the FTSE Futures eked a small gain, possibly as a result of a weaker pound.

The credit rating agency S&P has put out a credit watch, placing Brazil’s debt—which is already rated at 'BB', two steps below the acceptable investment grade—with negative implications. This means the country may be further downgraded in the next three months. The nation's fiscal adjustment is also at risk of stalling amid political uncertainty following allegations of bribery and corruption against President Michel Temer. The warning is likely to create a situation where investors will begin to flee and sell off their assets, but the selloff may provide unusual bargains for the daring, contrarian investor.

US monetary policy remains in focus after recent data showed all was not well for the US, the world's largest economy. Fed Governor Lael Brainard said she's not seeing much progress on core inflation, and investors seem to agree, as Treasury yields aren't able to overcome the March highs due to demand outpacing supply. This would not be the case should traders believe alternate high yields are coming.

US 10-Y Daily
US 10-Y Daily

Upcoming Events

Interest Rate Decisions

USD/CAD Daily Chart
USD/CAD Daily Chart

    • Canada, tomorrow at 10:00EDT – forecast to remain at 0.50%
    • South Africa, Thursday, forecast to remain at 7.00. This is an oil currency, and is subject to significant volatility depending on the OPEC decision scheduled for the the same day.
    • South Korea, Thursday, forecast to remain at 1.25%. The won surged recently, despite North Korean missile launches, as it may be forming a base for the currency.
  • Germany’s IFO report at 4:00 EDT, Business Climate forecast to rise from 112.9 to 113.1, Expectations forecast to rise from 105.2 to 105.4, while the Current Assessment forecast is set to decline from 121.1 to 121.0.

Economic Events

  • French business confidence data has met expectations, and will rise from 104 to 105.
  • The OPEC deal extension, to extend the limit on oil production from six to nine months, will be formally announced on Thursday and is considered by traders to be a foregone conclusion. However, the International Energy Agency warned last week that merely extending the deal won't be enough to bring markets in balance. Instead, deeper cuts are needed. Citigroup says there is a 60%-70% chance OPEC and its allies will announce even deeper cuts, taking 300,000-500,000 more barrels per day off the market.

Market Moves

Stocks

S&P 500 Daily Chart
S&P 500 Daily Chart

  • Futures on the S&P 500 fell 0.1 percent as of 8:15 a.m. in London. The underlying gauge rose 0.5 percent on Monday. The index has climbed 1.6 percent in three days following a 1.8 percent drop last Wednesday, and sits just 0.4 percent from its all-time high.
  • The Stoxx Europe 600 Index and the U.K. FTSE 100 Index barely registered any significant movements.
  • Japan’s TOPIX dropped 0.2 percent after swinging between gains and losses. South Korea’s KOSPI rose 0.3 percent, Hong Kong’s Hang Seng fell 0.1 percent, and the Shanghai Composite Index lost 0.5 percent.
  • The selloff in Brazilian assets resumed on Monday. The NEXT Funds IIbovespa Linked (T:1325), a Japanese equity ETF that tracks Brazil’s benchmark index, slumped 3.9 percent in Tokyo trading on Tuesday.
  • Noble Group (SI:NOBG) plunged 28 percent before being halted in Singapore as the S&P said the embattled commodity trader could default on its debt over the next year as it spirals further into distress.

Currencies

  • The U.S. dollar index declined 0.08% to finish at 96.907.
  • The yen rose 0.1 percent to 111.14 per dollar.
  • The pound slid 0.1 percent to $1.2987.
  • The euro rose 0.1 percent to $1.1248.
  • TheNew Zealand dollar jumped up 0.4 percent.
  • The Mexican peso dropped 0.1 percent.
  • The Bloomberg Dollar Spot Index was flat, trading near its lowest level since November.

Bonds

Commodities

  • WTI crude oil fell 0.8 percent to $50.72, after jumping above $51 per barrel on Monday.
  • Gold rose less than 0.1 percent to $1,261.74 an ounce.
Opening Bell: Risk-Off Returns Via UK Terror, Trump Investigation
 

Related Articles

Jeffrey Halley
Markets Circle In Holding Pattern By Jeffrey Halley - Jun 16, 2021

It wasn’t a night to write home about yesterday as investors adjusted positioning as they circled in the holding pattern ahead of today's FOMC decisions. Wall Street equities...

Opening Bell: Risk-Off Returns Via UK Terror, Trump Investigation

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.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
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?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
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.
Continue with Google
or
Sign up with Email