Originally published by Rivkin Securities
Investors bid typical safe haven assets higher on Tuesday with little fundamental data to guide markets geopolitics remained in focus. US. Secretary of State Rex Tillerson stepped up the rhetoric denouncing Russia’s support for Syrian President Bashar al-Assad at a G7 meeting in Italy. The US Dollar Index weakened -0.33% as US treasury yields declined with both the two and 10-year yields dropping -3.6 and -6.3 basis points respectively, spot gold surged +1.58% shown on the first chart below and the yen strengthened +1.2%. The Russian ruble strengthened for a second day in row as oil prices rose, up +0.56% after having declined as much as -3.2% over the past week. The Korean won weakened -0.19% taking declines over the past fortnight to -3.1% over rising tensions between the US and North Korea.
Unsurprisingly given the risk-off sentiment equity markets were softer, with both the S&P 500 and Nasdaq 100 down -0.14% and -0.43% respectively. In Europe the Euro STOXX 600 was flat, down just -0.02% while the DAX dropped -0.50%. In Asian key benchmarks were also lower, with the Nikkei 225 down -0.27% on the back of a stronger yen, the Hang Seng declined -0.72% as did the KOSPI down -0.44%. The standout performer was the S&P/ASX 200 after the NAB business conditions index rose from 9 to 14 in March, suggesting growth would likely be supported in the near-term.
The British pound strengthened +0.63%, as did the FTSE 100 which gained +0.2% followed slightly softer than expected inflation data. Year-on-year in March core inflation rose +1.8%, less than the +1.9% forecast and prior reading of +2.0%. While the recent stabilisation in the Pound shown on the second chart below has helped to slow gains in prices, expectations are for inflation to rise to 3% by the end of 2017. This is supported by the continued rise in producer output prices, also known as “factory gate” prices which rose +3.6% over the same period, exceeding expectations of +3.4% but slightly down from the February reading of +3.7%.
The UK two-year yield was unchanged at +0.096% while the 10-Year yield fell -2.4 basis points to +1.053% with the data unlikely to sway the Bank of England from keeping rates on hold at the record low +0.25%. On Wednesday we’ll also get more UK data in the form for unemployment and wage growth. Pay is expected to rise at +2.1% excluding bonuses, which will be below the +2.3% headline inflation figure on Tuesday.
Despite the weaker lead from Wall Street overnight the local market looks set to continue recent momentum with ASX SPI200 futures up +18 points or +0.30% in overnight trading.
Data releases:
· Chinese CPI & PPI (YoY Mar) 11:30am AEDT
· UK Unemployment (3m/m Feb) 6:30pm AEDT
· UK Weekly Earning Ex. Bonus (3m/YoY Feb) 6:30pm AEDT
· Bank of Canadian Rate Decision 12:00am AEDT
· US Crude Oil Inventories (Apr 7th) 12:30am AEDT
Chart 1 – XAU/USD (Spot Gold)
Chart 2 – GBP/USD
Source: Rivkin, RivkinTrader