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Stock markets are mostly on the front foot and Treasury yields are nudging higher along with metal prices as global growth hopes colour trading. The euro is weaker, however, amid lingering concerns about the continent’s political mosaic.
What to watch
Worries about Europe are back on the radar, with upcoming elections and signs of renewed stress over Greece’s bailout causing nervousness among forex and fixed income traders.
French sovereign bonds are under pressure amid growing concerns that Marine Le Pen, the anti-euro, far-right leader, could claim victory in the country’s approaching presidential election. Investors are wary this could embolden anti-EU movements in forthcoming polls across the continent, creating uncertainty about the eurozone project.
The yield on the 10-year French bond, which moves inversely to the price, is up 3 basis points to 1.13 per cent.
As money moves into the perceived haven of German Bunds, pushing the benchmark yield down 1bp to 0.35 per cent, this leaves the Franco/German yield spread, the premium Paris must pay to attract investors, at 78 basis points, near its highest in four years.
Meanwhile, Greece’s 2-year bond yield is 9.87 per cent as the markets fret that disagreement within the IMF about Athens’ bailout package could spark a fresh bout of debt angst among the bloc’s fiscally-challenged periphery.
The euro is 0.2 per cent weaker at $1.0655, flirting with a two-week low having fallen almost 1 per cent over the first two sessions this week.
So far, European stocks don’t seem especially bothered by the euro’s existential angst, instead welcoming the benefit provided to exporters by a softer currency.
The Euro Stoxx 600 index is up 0.3 per cent, just shy of a 13-month high as sentiment also is underpinned by Wall Street remaining close to its peak.
US index futures suggest the S&P 500 will add 1 point to 2,294 when trading gets under way later in New York, leaving the benchmark equity gauge just 4 points shy of its record closing high touched last month.
The mood in Asia was upbeat. Japan’s Topix rose 0.5 per cent, while Australia’s S&P/ASX 200 gained 0.5 per cent and Hong Kong’s Hang Seng added 0.7 per cent. China’s Shanghai Composite was up 0.5 per cent while the technology-focused Shenzhen Composite added 0.8 per cent.
The US dollar index is 0.3 per cent firmer at 100.56, after closing on Tuesday above the 100-mark for the first time in a week.
It is eyeing its sixth consecutive day of gains in a sign perhaps that the “Trump trade” — a bet that the new US president will boost the economy and lead to a faster pace of interest rate rises by the Federal Reserve — is reignited.
The yen is flat at ¥112.34 per greenback and sterling is just 0.2 per cent softer at $1.2492 as traders ponder the latest Brexit news.
China’s renminbi was flat at Rmb6.885 per dollar, having fallen one-third of 1 per cent on Tuesday as data showed the country’s foreign exchange reserves dipped below $3tn for the first time since February 2011.
The broader market’s somewhat bullish tone is crimping demand for highly-rated sovereign debt.
The yield on the 10-year US Treasury is up 1bp to 2.40 per cent and the more policy-sensitive 2-year note is a fraction of a basis point firmer at 1.17 per cent.
Futures markets are pricing in a 40.7 per cent chance of a 25 basis point interest rate rise by the Federal Reserve in May.
Oil prices are again under pressure as investors fret that a recent production cut by Opec and other big drillers is being counteracted by additional US output.
Brent crude, the international benchmark, is down 0.6 per cent to $54.73 a barrel, near a three week low, and West Texas Intermediate is off 0.8 per cent to $51.74.
Copper is up 1.1 per cent to $5,873 a tonne after workers voted to strike at Chile’s Escondida, the world’s biggest mine of the red metal.
Gold is struggling in the face of the firmer dollar, slipping 0.1 per cent to $1,233 an ounce.
Additional reporting by Peter Wells in Hong Kong
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