Daily Management Review

Investors Kept Cautious By Geopolitics From France To Korea


04/10/2017




Investors Kept Cautious By Geopolitics From France To Korea
Due to geopolitical tensions in the Middle East and the Korean peninsula, and with investors refraining from making big bets, trading volumes were muted for many financial market assets.
 
It is also a holiday-shortened week in much of the West.
 
Reaching the point where some see them as expensive, were stuck in neutral ahead of U.S. earnings season this week, the dollar inched towards three-week highs drawing support from U.S. rate hike expectations while global stocks.
 
After activist hedge fund Elliot Management urged the company to pursue a spin-off of its U.S. business, European stocks were little changed though shares of mining major BHP Billiton jumped more than 5 percent.
 
Investors were spurred to move into safer assets such as government debt by the increased geopolitical risks.
 
While U.S. Secretary of State Rex Tillerson warned the strikes were a warning to other nations, including North Korea, top aides to U.S. President Donald Trump differed on Sunday on where U.S. policy on Syria was headed after last week's attack on a Syrian air base.
 
"The risks of a conflict have certainly grown and that should keep the dollar supported against most Asian currencies with hawkish comments from the U.S. central bank also helping," said Gao Qi, an foreign exchange strategist at Scotiabank in Singapore.
 
As investors fretted over the rise of far-left candidate Jean Luc Melenchon in polls before this month's presidential vote, the euro edged lower and France's borrowing costs hit their highest level over Germany in six weeks.
 
The final result has been made more unpredictable and the possibility that Melenchon will square off against far-right leader Marine Le Pen in the decisive second round in May has been raised by his emergence over the past week.
 
 Noting its highest since Feb. 27, in early trading on Monday, France's bond yield spread over Germany hit 70 basis points.
 
"The market is focusing a bit too much on the extreme possibilities, but I guess with the elections coming up so soon some nerves are inevitable," said DZ Bank strategist Christian Lenk. "But at the end of the day I think (the second round) will be Macron versus Le Pen."
 
Since investors after the 10 percent rise since last November's lows has taken valuations above long-term averages, global stocks have traded flat over the past month. Compared to a 15-year average of about 14 times, the MSCI AC World index trades at 16 times forward earnings.
 
Although another run-up in U.S. drilling activity kept a lid on gains, oil prices rose, in commodities, supported by strong demand and uncertainty over the conflict in Syria. Up by 0.7 percent at $55.63 per barrel were the brent crude futures, the international benchmark for oil prices. U.S. West Texas Intermediate (WTI) crude futures were up 0.6 percent at $52.55 a barrel.
 
Spot gold was little changed.
 
(Source:www.reuters.com) 






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