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Markets Update Feb 22

 

 

 

  • European stocks rally Fizzles
  • S&P Futures Turn Red As USDJPY Slides, Bunds Strongly Bid
  • Euro Slides To 6-Week Low Despite Sharp German Business Climate
  • Stocks Gain as Market Sentiment Splits

 

EUR/USD continues to head south this week. In the Wednesday session, the pair is trading at the 1.05 line, it’s lowest level since January 11.

Markets reflects a mixed picture of investor mood, as political risk sent both the euro and German two-year bond yields lower while global equities tracked a U.S. rally. The dollar edged higher before the release of Fed minutes.

The exact  catalyst is unclear although traders are citing continued French political risks, as the recent OAT selloff continued this morning on Le Pen fears.

Earlier in the session, global stocks hit record highs on Wednesday, pushing gains for the year above those for all of 2016.

Asian stocks rose even as Tokyo shares wrestled with a strengthening yen, as markets from Hong Kong to Singapore followed a rally in the U.S. The dollar fell against most major currencies while oil rose for a fourth day.

Frexit Fears Growing, Risks Remain Contained : The spread between French and German 10-year government bond yields has widened over the past several days amid growing concerns that an election victory by euroskeptic candidate Marine Le Pen could ultimately lead to France exiting the European Union.

As analysis recently published  by BI Economist Maxime Sbaihi shows, France’s unique political and institutional set-up means the chances of Frexit happening anytime soon are very remote. The chart below illustrates the sixsignificant hurdles between Le Pen and Frexit.

Investors in Europe seem increasingly divided, with French presidential elections and the U.K.’s Brexit plans driving demand for the safest debt and optimism for global economic growth and improved corporate earnings spurring stocks. Next on the calendar are minutes from the U.S. Federal Reserve’s latest meeting, which may offer traders more clues on the path of interest rates in the world’s biggest economy.

As a result, markets painted a mixed picture of investor sentiment on Wednesday, as political risk sent both the euro and German two-year bond yields lower while global equities tracked a U.S. rally. The dollar edged higher before the release of Fed minutes, up 0.3% at 101.64, gaining against the euro and sterling, pressuring oil lower.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 percent, reversing an earlier drop. The yen led advances in major currencies, strengthening 0.5 percent to 113.17 per dollar, following two days of declines.
  • The British pound weakened 0.3 percent.

Bonds

  • The yield on 10-year Treasuries little changed at 2.43 percent.

Commodities

  • Gold rose 0.1 percent to $1,237.09, after alternating between gains and losses over the previous four sessions.
  • Iron ore slipped 0.6 percent, after Tuesday’s 3.2 percent surge. Last year’s rally has extended into 2017, aided by rising steel prices and elevated demand for higher-grade ores, though some miners are flagging concerns that recent gains are probably overdone.

 

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