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Market Comment | Positive mood remains in financial markets despite uncertainties



  • Risk assets extended Friday’s rally, especially in Asia, after the strong US employment growth and the slowdown in wage increase sparked optimism about a potential scenario of strong growth with limited inflation pressure. Equity markets rose across the board, but US import tariffs weighed on the Dow Jones industrial. Equity volatility hovered around 16 points after declining to the minimum levels since the selloff (VIX 15%).
  • Despite this positive mood, the new tariffs imposed on US steel and aluminium imports could be a significant source of uncertainty, mitigated by the potential negotiation between main blocks to avoid the tariff, as Australia has done. So far only Australia and the members of NAFTA are excluded, the last two conditional on the outcome of current negotiations. Apart from this issue, during the week, the market’s attention will be focused on US price data as well as Chinese activity indicators and the Fed’s and the ECB’s speakers
  • Sovereign bond yields inched down across the board, especially in the European peripherals. However, Italian yields showed minor changes on the back of last week’s election results that not only brought about a hung parliament but also a rise of anti-establishment parties.
  • Commodities showed a poor performance. Oil prices dropped sharply – dragged by concerns about increasing US output (see) while worries about global trade also hampered the price of other commodities such as metals and even agricultural commodities (grain and soybeans). In this context, EM currencies depreciated across the board, except the Colombian peso, supported by the election results (see)


Table 1

Update 17.45 CET 12 March 2018

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Fuente: BBVA Research



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