Stock markets are generally firmer as investors absorb a flurry of company earnings reports. The dollar is regaining its footing, nudging gold down from recent highs, while sovereign bond markets are becalmed.

It’s a busy day for corporate results in Europe, and the US where Coca-Cola and Manchester United are among those due to present their earnings.

Data on the slate include the US weekly jobless claims.

A number of central bankers are in line to make speeches, including St. Louis Federal Reserve Bank President James Bullard and Chicago Federal Reserve Bank President Charles Evans.

Hot topic
Is gold rediscovering its haven status? The precious metal is dipping 0.2 per cent to $1,239 an ounce amid a spot of profit taking.

But on Wednesday it touched a three month intraday high of $1,244.7 as a number of factors offered support.

First is the US dollar. The buck, in which most commodities are denominated, tends to have an inverse correlation to bullion. Consequently the dollar’s recent stall following its post US election bounce has been supporting the yellow metal in recent weeks.

Similarly, as the “Trumpflation trade” has faded — with investors questioning the extent by which the new US administration’s mooted policies can boost the economy — so government bond yields have pulled back.

Gold, which in effect offers no yield, tends to benefit from lower implied interest rates because this reduces the “opportunity cost” of holding the metal.

Then there is the haven angle. Traditionally seen as a bolt-hole in times of political stress, gold has been lifted of late by concern that president Trump’s protectionist policies may aggravate relationships with other countries.

In addition, a flurry of elections across Europe this year are seen raising the risk that anti-EU parties could gain ground, potentially calling into question the future of the eurozone.

The euro is once again on the back foot as the US currency displays broad strength.

The common currency is off 0.2 per cent to $1.0674, the Japanese yen is 0.3 per cent weaker at ¥112.26 per dollar and the pound is easing 0.2 per cent to $1.2510 after UK members of parliament voted to begin the formal process of leaving the EU by approving the triggering of Article 50.

All this leaves the dollar index, which at the start of 2017 hit a 14-year high of 103.82, up 0.1 per cent to 100.39.

The Australian dollar is down 0.3 per cent at $0.7621 after the Housing Industry Association revealed that new private home sales for December rose 0.2 per cent year-on-year after growing more than 6 per cent a month earlier.

Stock markets are mainly firmer, but any bullish mood is subdued by Wall Street’s inability to extend its post-election rally.

US index futures suggest the S&P 500 will shed 1 point to 2,293.6, when trading gets under way later in New York. The S&P has not closed outside a range of 2,258 and 2,298 all year as investors wait to see some meat on the bones of president’s Trump’s mooted policies.

The pan-European Stoxx 600 index is up 0.4 per cent as investors weigh results from the likes of Societe Generale, Total, Commerzbank and Publicis.

The mood was more mixed in Asia, where Japan’s Topix lost 0.7 per cent amid a recently stronger yen, but Australia’s S&P/ASX 200 index rose 0.2 per cent, as gains by utilities offset a drop for materials stocks.

In Hong Kong, the Hang Seng index inched up 0.1 per cent, while China the Shanghai and Shenzhen Composite indices rose 0.5 and 0.7 per cent respectively.

Fixed income
A calm tone across the broader market is matched in the sovereign bond sector, where moves are minimal.

The yield, which moves inversely to price, on 10-year US Treasuries is barely changed at 2.35 per cent and the more policy-sensitive 2-year note is static at 1.16 per cent.

Futures markets are pricing in a 39.1 per cent chance that the Federal Reserve will raise interest rates by 25 basis points at its meeting in May.

Benchmark 10-year German Bund yields are becalmed at 0.30 per cent and the equivalent maturity French paper is a faction of a basis point firmer at 1.01 per cent. The Franco/German yield spread, now 71 basis points, hit a four year high of 78.5bp at one stage on Wednesday as investors demanded a premium from Paris on worries about the upcoming French election.

Oil prices are on the mend after oversupply concerns prompted a dip in recent sessions.
Brent crude, the international marker, is up 0.8 per cent at $55.55 a barrel after hitting a three week low of $54.44 on Wednesday. West Texas Intermediate, the US marker, is adding 0.8 per cent to $52.76 per barrel.

Copper is up 0.2 per cent to $5,879 a tonne , hovering near a two-month high, as traders await the fallout from a planned strike at the world’s biggest mine of the red metal, Chile’s Escondida.

Additional reporting by Hudson Lockett in Hong Kong

Get alerts on Currencies when a new story is published

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Comments have not been enabled for this article.

Follow the topics in this article