Article / 10 April 2017 at 7:00 GMT

Morning Markets: Risk-on revives despite US/Russia chasm

Former managing editor, / Saxo Bank



  • Eurozone: Sentix Investor Confidence Index (0830 GMT) 
  • US: Labor Market Conditions Index               (1400 GMT)
  • US: Employment Trends Index                      (1400 GMT)

The Syria-induced risk-off that tailed last week might have been expected to continue after that disappointment in the US jobs report for March and the ratcheting up of tensions between Moscow and Washington this weekend, but that's proving not to be the case as we head into European open.

The usual safe-haven culprits — yen, gold and government bonds — were all on the retreat Monday as the precious metal's break for ground above $1,261/oz last week petered out. The brief flirtation of the US 10-year Treasuries yield with sub-2.3% territory also turned cold to return to just below the 2.4% mark and USDJPY was firmly ensconced above 1.11 propelling Nikkei to a near 1% rise. FTSE, Dax and Cac40 are all slated to rise after the 0700 GMT market open.

Dollar overall enjoyed an encouraging Asia session, arm-wrestling EURUSD below 1.06 and also briefly taking USDCNH above 6.91, for a one-month high.

A weakening of China's renminbi is unlikely to sour the feel-good factor that emanated out of the Trump/Xi summit in Florida, although Chinese president Xi Jinping will not have thanked his counterpart for putting him in the awkward position of being in the vicinity when he launched that attack on a Syrian airbase. It will not have gone unnoticed for Xi meanwhile that Trump has his eye on Pyongyang with the deployment of a US aircraft carrier near the Korean peninsula and that he is dealing with a different type of character from Barack Obama, despite Trump's campaign pledges to the contrary.

But North Korea is secondary right now to the Washington/Moscow fallout as Russia's pursuit of a Trump victory in 2016 now begins to look like folly. We had of course speculated that Moscow might actually be more at home with a Hillary-Clinton presidency in the run up to the vote on November 8 and those words are starting to look prescient.

Vladimir Putin seems somewhat shell shocked by the Trump intervention and the bluster this weekend is likely to prove no more that that for now. He along with the Assad regime and his allies in Tehran will no doubt formulate a more subtle response in time.

It's why unease continues to underpin sentiment. This drama is a long way from playing out.

Market signals

Asian session

  • Most Asian markets made gains, shrugging off global tensions and weakness on Wall St
  • WTI has made gains in anticipation of robust demand for the summer driving season
  • Japan's February unadjusted current account surplus was a strong ¥2.8 trillion
  • The Nikkei 225 made gains on the weak yen; it was up 0.68% to 18,791.28 at 0457 GMT
  • The troubled electronics giant Toshiba is at risk of delisting from Tokyo Stock Exchange
  • BoJ pledged it will maintain its easing measures to achieve its 2% inflation goal
  • Korea's Kospi Composite was down 0.95% to 2,131.27 at 0535 GMT
  • Hong Kong's Hang Seng was up by a slim 0.02% to 24,271.14 at 0513 GMT
  • The Shanghai Composite was down 0.31% to 3,276.45 at 0514 GMT
  • Iron ore prices slumped nearly 6.8% to just $75.45/tonne
  • Australia's S&P/ASX200 defied global jitters and the ore price slide and headed higher
  • The S&P/ASX200 was up by a solid 0.75% to 5,906.30 at 0548 GMT
  •  In a worrying sign for the key housing sector, Australian home loans fell 0.5% in February

Forex ahead

  • USD clawed back some falls against the yen; it was worth ¥111.3970 at 512 GMT
  • The yuan lost ground yet again as the PBoC set its reference rate lower
  • The US dollar was buying 6.9068 CNY at 0539 GMT
  • South Korea's won is up 6% this year despite scandals and worries about Pyongyang
  • The US dollar was worth 1,141.8000 KRW at 0544 GMT
  • Soft housing data pushed AUD below 0.75; it was worth just 0.7487 at 0512 GMT

From the Floor

Nothing to see. "The US dollar managed to brush off the nonfarm payrolls report," says Hardy

US yields. "We saw a short dip down to 2.27% on the NFP number but it then climbed to 2.38%," says Boye.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

The Fed's Labor Market Conditions Index for March is set to dip slightly while the CB jobs trends index will provide fresh context on last Friday's disappointing NFP data, writes James Picerno.

Domestic distraction

In his regular Macro Monday analysis, Kay Van-Petersen asks whether the missile strike on the Assad regime was just a bid to switch attention from domestic woes to the world stage.

Crucial level
AUDUSD finished the week on its knees and sits at a crucial level at last month's lows, explains Saxo's Sydney trading team


 The deployment of a US naval strike group to waters off North Korea is a worrying sign of tensions between Washington and the unpredictable Pyongyang regime. Photo: Shutterstock

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