Markets:
- Gold up $60 to $1928
- Oil up $4.74 to $87.65
- US 10-year yields down 7.9 bps to 4.62%
- S&P 500 down 0.6%
- CHF leads, NZD lags
This isn’t the kind of price action anyone wants to see while bombs are flying in the Middle East. The strength of the rallies in gold and oil suggest some real fear about a wider conflict beyond Gaza. At best, these moves signal caution mixed in with some short covering but the larger they got as the day wore on, the more it felt like something ominous.
The Swiss franc was the safe haven of choice with sales in EUR/CHF kicking off midway through European trading and extending into the European close.
The pound was also sold for the second day, falling 40 pips and finishing near the lows of the day at 1.2134. The two day slide in cable wiped out the previous five days of gains and leaves a sustainable bounce in doubt.
The antipodeans remain the larger laggards as a three-day fall in NZD/USD puts the pair back to within striking distance of the September lows, which are also the lows of the year. That’s in a week where China floated more fiscal stimulus so it underscores the level of worry.
Treasury yields weren’t as big of a factor today as 30-year yields fell 11 bps on something of a safe haven bid. That’s a big turn after the terrible auction yesterday.
The next big question is what happens on the weekend and beyond. There’s a risk that we’re not into WWIII by the time markets reopen (though Dalio says there’s a 50/50 chance it’s coming) and if that’s the case, we should see some of the safety premium fade.
Have a safe weekend.