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Stock markets firmer as geo-political tensions ease somewhat
Havens lose some lustre, pushing the yen and Treasury prices lower
● S&P 500 futures gain ground ahead of earnings season
Dollar index steady at 101.21 after jobs data; sterling around $1.24
● Brent crude holds above $55 a barrel and gold above $1,250 an ounce

The geo-political premium that has recently boosted 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 trimmed.

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 steady on Monday at $1,254. The Japanese yen, a regular beneficiary from market nerves, is 0.3 per cent weaker at ¥111.36 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, are nudging up by one basis point to 2.38 per cent, while equivalent maturity German Bunds, the primary European fixed income haven, is adding 1bp to 0.24 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 is weakening by 0.4 per cent to 1,140.98 per dollar after the Pentagon deployed an aircraft carrier group to the waters near the Korean peninsula.

Forex
The dollar index, which tracks the buck against a basket of its peers, is less than 0.1 per cent firmer at 101.21 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 0.2 per cent to $1.2392.

Commodities
Oil prices are extending last week’s advance, which came amid worries of Middle East supply disruption. Brent crude, the international energy benchmark, is up 0.4 per cent to $55.42 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 0.5 per cent at $52.49.

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

Copyright The Financial Times Limited 2017. All rights reserved.
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