- The focus of financial markets remained on developments on the geopolitical front, especially in US-Russia relations, which according to the Kremlin are “in their worst period since the end of the Cold War,” sending market volatility (VIX) to its highest level in 2017). The official visit of the US secretary of state to Russia made possible the first round of talks between the two administrations. The main headlines so far are that Russia has demanded some clarity as to the US administration’s Syria policy, while the US president has said that the US will not enter the Syrian civil war. (see)
- Safe-haven assets such as gold and the JPY continued their recent trend, but at a slower pace. They remained almost unchanged, giving some breathing space, but retaining recent improvements. Other “risk-free” assets such as US and German sovereign bonds, continued their downward trend in yields, hovering around their lowest level this year, influenced by deterioration in market-based inflation expectations on both continents and cooler expectations of the tightening process of developed countries’ central banks. Nonetheless, despite there being no significant news regarding the presidential race in France (see), the recent spike in French sovereign premiums has moderated today.
- Equity indices were modestly lower in the US, braced for the start of the Q1 earnings season, while European equity indices also inched down, with peripheral countries (Spain and Italy) underperforming, dragged down by the banking sector.
- The upward trend in oil prices continued, boosted by OPEC data, which showed a bigger-than-expected drop in cartel production (see). Nonetheless, rising output of non-OPEC countries (particularly the US) could partly offset this effect. The early gains disappeared when the US markets opened. Despite the ongoing volatility, oil prices, backed mainly by geopolitical worries, are close to their highest levels since mid-2015.
We will be back next Monday. Happy holidays!
Update 18 CET 12 April, 2017
Source: Bloomberg, Datastream and Haver
* With one day delay
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