Stock markets steady as geo-political angst eases – Financial Times

This post was originally published on this site

Monday 14:30 BST

What you need to know
● Stock markets steady as geo-political tensions ease somewhat
● Havens lose some lustre, pushing the yen and gold prices lower
● S&P 500 gains ground ahead of earnings season
● Dollar index steady at 101.13 as Treasury yields dip
● Brent crude holds above $55 a barrel
——————-

Hot topic

The geo-political premium recently afforded some haven assets is continuing to wither, but pockets of angst remain in a market starting to turn its attention to corporate profitability as the first-quarter earnings season fast approaches.

Tensions over Syria, North Korea and China’s relationship with the US last week helped drive investors into gold, the yen and government bonds — while briefly rattling stock markets — but those trades have been pared.

Worries about the potential for further agitation between Washington and Moscow over the Assad regime remain. But investors seem relieved that president Donald Trump and his Chinese counterpart seemed to have got on quite well during their summit in Florida and the countries agreed to work together to reduce the chances of a damaging trade war between the world’s two biggest economies.

Gold, which on Friday hit a five-month intraday high of $1,270 an ounce, is down 0.3 per cent on Monday to $1,250. The Japanese yen, considered among the most attractive currency bolt-holes, is 0.1 per cent weaker at ¥111.18 per dollar, having touched ¥110 at the end of last week, its strongest since mid-November.

Similarly, US 10-year Treasury yields, which move opposite to the bond price, were also higher earlier in the session. But they are now nudging down by one basis point to 2.37 per cent as equivalent maturity German Bunds, the primary European fixed income haven, slip 2bp to 0.22 per cent.

Still, angst over North Korea is being felt in Seoul, where the Kospi equity index underperformed the region with a 0.9 per cent decline, and the won weakened by 0.3 per cent to 1,140.33 per dollar after the Pentagon deployed an aircraft carrier group to the waters near the Korean peninsula.

Equities

The easing of political tensions is helping stock markets display a bullish bias as investors remain fairly confident that the US first-quarter earnings season, which swings into gear this week, will justify equity valuations.

In New York, the S&P 500 is gaining 3 points to 2,358.5, leaving the Wall Street benchmark only about 1.6 per cent below its record touched at the start of March.

This positive showing is helping Europe get the week off to a steady start, the Stoxx 600 down less than 0.1 per cent as London-listed resources groups find form.

Japanese shares, particularly those of exporters, benefited from a decline in the yen. The Topix index rose 0.7 per cent, with iron and steel stocks the best performers.

In Australia, where the S&P/ASX 200 gained 0.9 per cent, commodity stocks also did well, benefiting from a surge in coking coal prices after a cyclone hit the north-eastern coast of Queensland and disrupted supplies of the steelmaking ingredient.

Hong Kong’s Hang Seng was barely changed, while China’s Shanghai Composite slipped 0.5 per cent from a four-month high as profit takers moved in.

Forex

The dollar index, which tracks the buck against a basket of its peers, is less than 0.1 per cent softer at 101.13 as traders continue to absorb last Friday’s news that the US economy created just 98,000 jobs in March, a little more than half of what economists forecast.

Analysts were upbeat, though, saying the low number was a result of bad weather.

The euro is just 4 pips weaker at $1.0584 and the UK pound is adding 0.3 per cent to $1.2411.

The South African rand is again under pressure — off 0.9 per cent to 13.8760 per greenback — amid fallout from the finance minister’s sacking and subsequent credit rating downgrades.

Commodities

Oil prices are extending last week’s advance, which come amid worries of Middle East supply disruption. Brent crude, the international energy benchmark, is up 1.2 per cent to $55.89 a barrel and on track for a sixth straight day of gains, the longest winning streak since mid-August.

West Texas Intermediate, the main US contract, is up 1 per cent at $52.76.

Iron ore has wiped out all its gains since the US presidential election. The futures contract for September delivery fell as much as 3.3 per cent to Rmb517 ($74.84) on the Dalian Commodity Exchange, the lowest level since the US presidential election.

Additional reporting by Peter Wells in Hong Kong

For market updates and comment follow us on Twitter @FTMarkets