Safe Haven Assets Bid Higher On Geopolitics, Pound Rises As Inflation Eases Temporarily, ASX Futures +18

Investors bid typical safe haven assets higher on Tuesday with little fundamental data to guide markets geopolitics remained in focus. U.S. 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 U.S. dollar index weakened -0.33% as U.S. treasury yields declined with both the two & ten-year yields dropping -3.6 & -6.3 basis points respectively, spot gold surged +1.58% shown on the first chart below and the Yen strengthened +1.2%. The Russian Rubble 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 U.S. and North Korea.

Unsurprisingly given the risk-off sentiment equity markets were softer, with both the S&P500 and Nasdaq100 down -0.14% & -0.43% respectively. In Europe the Euro Stoxx 600 was flat, down just -0.02% while the DAX30 dropped -0.50%. In Asian key benchmarks were also lower, with the Nikkei 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 ASX200 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 FTSE100 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 U.K. two-year yield was unchanged at +0.096% while the ten-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 U.K. 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. If you’re interested in trading global markets and still need practice, click here to open a free $100,000 Rivkin Trader account.

Data releases:

·         Chinese CPI & PPI (YoY Mar) 11:30am AEDT

·         U.K. Unemployment (3m/m Feb) 6:30pm AEDT

·         U.K. Weekly Earning Ex. Bonus (3m/YoY Feb) 6:30pm AEDT

·         Bank of Canadian Rate Decision 12:00am AEDT

·         U.S. Crude Oil Inventories (Apr 7th) 12:30am AEDT

Chart 1 – XAUUSD (Spot Gold)


Chart 2 – GBP/USD

Source: Rivkin, RivkinTrader

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This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via james.woods@rivkin.com.au or by phoning +612 8302 3631.

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