Thursday, January 9, 2020

Investors shift back to risky assets after Trump downplays fears for escalating tensions

Tags
  • Dollar
  • Gold
  • Stocks
  • US payrolls

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Market Recap: Investors shift back to risky assets after Trump downplays fear for escalating tensions

Wall Street recovered on Wednesday despite reports of Iran's attack on Iraq airbases housing US troops on Tuesday. US President Donald Trump said in a televised speech on Wednesday that Iran appears to be ‘standing down', dampening fear of further escalation in US-Iran tensions. 

Indexes Change (%) Net Change Closing Price
Dow Jones 0.56% 161.41 28,745.09
S&P500 0.49% 15.87 3,253.05
Nasdaq 0.67% 60.66 9,129.24
*Source: Bloomberg

The dollar continued to gain thanks to better-than-expected employment growth in the private sector. ADP's employment report showed private sector payrolls rose by 202,000 instead of the 160,000 growth that economists forecasted. The services sector added 173,000 jobs while the goods producing sector added only 29,000 jobs, driven mainly by the construction sector.

In the UK, British Prime Minister Boris Johnson's Brexit Withdrawal Bill continues to easily move through the Commons and will likely pass through the Commons today during the third and final reading. But negotiations between the EU and UK following Brexit will remain in question and sterling will likely be more sensitive to any developments on the negotiations instead of the Brexit Withdrawal Bill itself.

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Meanwhile demand for safe haven assets sharply fell, putting downward pressure on both gold and the yen. Gold declined after surging past 1610.00's level on Wednesday, as investors shifted back to risky assets. US Treasuries retreated as well, pushing yields higher back towards levels early last week. Benchmark 10-year yields surged 6 bps to 1.87%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -1.14% -17.95 1,556.42
Silver -1.65% -0.30 18.06
JPY -0.63% -0.68 109.12
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year 4 1.58%
10-Year 6 1.87%
30-Year 6 2.36%
*Source: Bloomberg

In Asia, stocks look set to track gains in the US market on Thursday. The Nikkei and KOSPI both started Thursday's trading session above the previous day's closing price. The ASX200 started the day relatively flat but gained momentum later in the morning to rise 0.92% as of 8.33am.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index 1.59% 369.26 23,574.02 8:13:20 AM
KOSPI Index 1.20% 25.89 2,177.20 8:33:20 AM
ASX200 Index 0.92% 62.77 6,880.40 8:33:06 AM
Hang Seng Futures 1.33% 372.00 28,430.00 2:59:59 AM
*Source: Bloomberg

US futures were slightly higher on Thursday morning, as markets continue to weigh the effects of tensions between the US and Iran. While it appears that the US is backing away from military action against Iran, tension between the two countries are likely to continue.

US Futures Change (%) Net Change Last Price As of (GMT +8)
Dow Futures 0.01% 3.00 28,773.00 8:25:32 AM
S&P500 Futures 0.04% 1.25 3,261.50 8:25:34 AM
Nasdaq Futures 0.07% 6.50 8,951.00 8:25:33 AM
*Source: Bloomberg

Today's economic release includes (all timings in GMT +8):

  • Germany Nov Industrial Production (3pm)
  • Eurozone Nov Unemployment Rate (6pm)
  • US Jan 4 Initial Jobless Claims (9.30pm)