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GLOBAL MARKETS-Yen and bond bulls charge on as share markets falter

Published 12/08/2019, 07:31 pm
Updated 12/08/2019, 07:40 pm
© Reuters.  GLOBAL MARKETS-Yen and bond bulls charge on as share markets falter
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* MSCI World share index turns lower

* European shares falter after positive open

* Gold steady near $1,500/oz

* Yen shines due to safe haven demand

* Sterling near January 2017 lows vs dollar

*

By Marc Jones

LONDON, Aug 12 (Reuters) - Yen and bond bulls charged on Monday while stocks struggled again, amid ongoing worries that a prolonged U.S.-China trade war and damaging Brexit could tip top economies into recession.

Early gains for Europe's main bourses had quickly disappeared .EU and Wall Street futures were already in the red .N after Asia-Pacific had also finished lower overnight .MIAPJ0000PUS .

That was despite a more than 1% rally for Chinese stocks .CSI300 after the yuan had avoided further drama CNY=PBOC and financial regulators there had relaxed margin financing rules late on Friday. .SS

Safety remained the name of the game. FX harbour, the Japanese yen, hit its highest in nearly a year and a half at 105.32 yen against the dollar and gained against the euro EURJPY= and Brexit-bruised British pound too GBPJPY= . /FRX

"Risk indicators and global markets have become more shaky and the yen is reflecting those concerns, and safe-haven shelters like the yen and the Swiss franc should continue to benefit," said Commerzbank (DE:CBKG) currency strategist Esther Reichelt.

In bond markets, the demand for guaranteed income was also unrelenting. GVD/EUR A rally in Italy's debt gave it an extra boost after Fitch kept country's rating steady despite the prospect of snap elections in the euro zone's third biggest economy now looming.

There were signs that League leader Matteo Salvini's call for those snap elections was facing mounting resistance from other parties whose support will be needed for the plan to succeed. kept Italy's rating unchanged and some market participants may be betting that a snap election could be delayed," said DZ Bank rates strategist Sebastian Fellechner, referring to the fall in yields.

Economists are also watching for a batch of global data this week. Goldman Sachs (NYSE:GS) became the latest to cut its U.S. growth forecast at the weekend, warning that a U.S. China trade deal now looked unlikely before the 2020 U.S. presidential election. week ago, China allowed the yuan CNY=CFXS to break through the key 7-per-dollar level for the first time since 2008, prompting Washington to label Beijing a currency manipulator and sparking market ructions.

The International Monetary Fund said on Friday that it stood by its assessment that the value of China's yuan was largely in line with economic fundamentals. MESSAGES

On Friday, Wall Street snapped a three-day winning streak after U.S. President Donald Trump said Washington was continuing trade talks with Beijing, but that the U.S. was not going to make a deal for now. comments helped to drive a late sell-off in a volatile session that saw the Dow Jones Industrial Average .DJI fall 0.34%, the S&P 500 .SPX lose 0.66% and the Nasdaq Composite .IXIC drop 1%.

White House trade adviser Peter Navarro subsequently said that the United States was still planning to hold another round of trade talks with Chinese negotiators. Street futures were down 0.5%. ESc1

In commodities, oil prices dipped on growth and trade worries, having risen sharply on Friday on a drop in European inventories and production cuts by the Organization of the Petroleum Exporting Countries.

International benchmark Brent crude futures LCOc1 were at $58.16 a barrel by 0829 GMT, down 37 cents from their previous settlement.

U.S. West Texas Intermediate (WTI) CLc1 futures were at $53.89 per barrel, down 61 cents from their last close.

Both benchmarks fell last week, with Brent losing more than 5% and WTI falling about 2%.

"The market is facing a buyers' strike," said Michael Tran, commodity strategist at RBC Capital Markets, noting the low level of investors' long positions betting on higher prices.

"Despite the laundry list of disruptions and additional barrels at risk, investor length is currently near a multi-year low."

Argentina's markets were ready for a slump too after voters soundly rejected President Mauricio Macri's austere economic policies in primary elections at the weekend, raising serious questions about his chances of re-election in October.

Argentina's 2028-maturing, euro-denominated government bond XS1715303779=TE was down more than 11 cents in European trading, Tradeweb data showed.

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