Morning Markets: Trump's Syria pivot punches gold higher
- Germany: February Industrial Production (0600 GMT)
- France: Industrial production index (0645 GMT)
- UK: February Industrial Production (0830 GMT).
- US: March Employment Report (1230 GMT)
US president Donald Trump shifted yet another of his fundamental campaign positions overnight to launch a missile attack on the Syrian airbase believed to have been the launchpad for the deadly Sarin attack Tuesday that left 86 dead.
The strike is also likely to prove a gamechanger in Washington's relationship with Moscow where the bromance between Trump and Russian counterpart Vladimir Putin is already waning barely three months since Trump's inauguration. Trump also dangled the carrot of global cooperation to take president Bashar al-Assad out of the equation backpedaling from his campaign pledge to limit international military commitments.
The flight to safe-haven assets saw US 10-year Treasuries briefly break through the key 2.3% yield mark and gold at last punched through the $1,261/oz resistance that had held the precious metal on numerous occasions over the last 10 days to hit $1,265/oz in the hour before the European open.
Dollar was marginally weaker easing to the 110.50 zone against yen although the Nikkei was able to take both the strike and USDJPY slippage in its stride to return to the green in the latter stages of the Asian day. The Shanghai Composite Index was likewise resilient although Hong Kong's Hang Seng took a 0.62% plunge as volatility coursed through the equities complex.
EURUSD meanwhile could be in for an interesting ride after European Central Bank officials led by president Mario Draghi said there would be no about-turn on its rates policy to send the pair to a three-week low. With nonfarm payrolls on the agenda at 1230 GMT, a strong figure could help calm markets and send EURUSD further down the slope especially if there are not perceived to be any major repercussions from Trump's strike.
Trump's executive order overshadowed talks with China president Xi Jinping with the administration's position on Beijing also having somewhat shifted from the black-and-white depiction that dominated the campaign trail. While the currency manipulation charge remains a live one within The White House, it no longer holds quite the sway of three months ago as secretary of state Rex Tillerson pushes a compromise agenda.
The realities of power remain the constant here. For Trump to get the deals he wants on free trade, North Korea, global warming, the South China Sea and, perhaps now, Syria, he needs China on board (and it is hard not to believe that Xi's implicit authorisation must have been sought and granted overnight). Not much will happen in the next 24 hours, but both men might have a clearer idea exactly who they are dealing with by the time Xi heads home.
Putin too will have a much clearer idea. His free hand in Syria might not be quite so free after all.
- Oil prices gave sentiment a lift in Asia, until the US strike on Syria led to uncertainty
- Risk off sentiment saw traders flock to gold, pushing prices close to a five-month high
- Trump's missiles raised uncertainty about Middle East crude supplies, and gave oil a lift
- Japan's Nikkei 225 rose in early trading, then slumped before rebounding
- The Nikkei 225 was up by a robust 0.63% to 18,714.53 at 0452 GMT
- Korea's Kospi Composite was down 0.12% to 2,150.15 at 0459 GMT
- The Shanghai Composite was up by 0.19% to 3,287.03
at 0517 GMT
- Hong Kong's Hang Seng was down by a hefty 0.64% to 24,117.30
at 0516 GMT
- Australia's S&P/ASX200 lost its early gains down by 0.24% to 5,843.50 at 0514 GMT
- Manila's move to occupy disputed islands could spark friction with Beijing
- The Korean won fell on the Syria news, but then rebounded
- The US dollar was worth 1,133.6000 won at 0533 GMT
- USD edged lower against the yen; it was worth ¥110.5160 at 0516 GMT
- The fragile Aussie dollar lost a little more ground; it was worth just 0.7531 at 0517 GMT
- EURCZK floor abandoned but response pretty muted
From the Floor
Airbase strike. "NFP will likely deliver but be overshadowed by Syria attack," says Garnry.
Safe-haven flight. "Global yields dived on safe-haven reaction with the US-10 year yield actually breaking below the 2.3% level before some reversal set in," says Boye.
Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.
There's little chance of a 'bad' nonfarm figure, and it would take more than one disappointing jobs number to weaken the Fed's resolve in hiking rates this year, says Juhani Huopainen
History may repeat
Max McKegg says that European politics could be the factor that drives a slide in the EURUSD, in a repeat of a pattern last seen in the late 1990s.
It may not be dead, but the Trump trade has most definitely had its wings clipped and that will change the dynamics in the equities space, says Peter Garnry in his Quarterly Outlook.
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