London — The dollar had its biggest drop in
almost a month on Monday as a bashing for oil prices on doubts about an
Opec output cut this week left investors reversing the "Trumpflation"
trades that have gripped markets since the US election.
Crude prices and Europe’s main stock markets were down more than 1% in early European trade as Italian shares tumbled again ahead of its referendum on constitutional change this Sunday.
Oil’s price fall added to a 3.5% plunge on Friday when it emerged that Saudi Arabia would not join talks with non-Opec producers on supply cuts.
The importance of oil’s role in global costs was cooling bets on a near-term inflation jump and tempering expectations for rises in US interest rates.
The dollar sank as much as 1.6% against the yen, going as low as ¥111.355 before recovering slightly to ¥112.00.
That was its biggest fall against its Japanese rival since October 7 and it was also one of its worst days against of top world currencies.
"It’s a bit of a pull back in the dollar," said Societe Generale strategist Alvin Tan. "The fall in oil is pushing back US bond yields. That is leading the consolidation in the dollar. There is more scepticism about an (Opec) output cut now."
The moves hoisted the euro to an 11-day high of $1.0686, getting a lift too from the election of Francois Fillon as the centre-right candidate in next year’s French presidential election.
The reformist former prime minister is now favourite to become president. According to a flash opinion poll, he would easily beat National Front leader Marine le Pen in a run-off second round. Markets worry about the rightist Le Pen, who promise of a referendum on EU membership menaces the future of the currency bloc.
Italy, plagued by political worries about its referendum on constitutional reform, remained a more obvious concern.
Having lost more than half their value over the past year, Italian banking stocks fell 3% to their lowest in almost two months as Italian government bonds also underperformed the wider rally in fixed income.
Opinion polls predict defeat for the government in what would be the third big antiestablishment revolt by voters this year in a major Western country after Britain’s Brexit vote and Donald Trump’s election victory.
"Fears are that an Italian dissent and resulting market turmoil would dissuade already gutsy investors from daring to participate in desperately needed recapitalisations within a very troubled €4-trillion banking system," said Mike van Dulken, head of Research at Accendo Markets.
Hot metals
As the dollar wilted in the currency markets, gold bounced back to $1,192.0 an ounce from Friday’s low $1,171.5, which was its lowest level since early February.
Industrial metals also remained red hot on hopes of strong demand for property and infrastructure investment in China and the United States.
Chinese steel futures jumped over 6% while iron-ore futures gained about 6% and zinc powered to a nine-year high on the London Metal Exchange.
Asian shares rose 0.4% overnight, led by gains in Hong Kong and Taiwan though Japan’s Nikkei, which has been performing even better than a record high Wall Street in recent weeks thanks to the yen’s fall, ended down 0.1%. "It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump’s policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
In the bond markets, the yield on 10-year US Treasuries dropped almost 5 basis points to 2.323%, off its 16-month high of 2.417% touched last week. Europe’s benchmark, German Bunds, saw their equivalent yield drop three basis points.
US stock futures slipped 0.2% ahead of US trading. Wall Street’s four main indexes all hit record highs last week, a feat last achieved in 1999.
Reuters
Crude prices and Europe’s main stock markets were down more than 1% in early European trade as Italian shares tumbled again ahead of its referendum on constitutional change this Sunday.
Oil’s price fall added to a 3.5% plunge on Friday when it emerged that Saudi Arabia would not join talks with non-Opec producers on supply cuts.
The importance of oil’s role in global costs was cooling bets on a near-term inflation jump and tempering expectations for rises in US interest rates.
The dollar sank as much as 1.6% against the yen, going as low as ¥111.355 before recovering slightly to ¥112.00.
That was its biggest fall against its Japanese rival since October 7 and it was also one of its worst days against of top world currencies.
"It’s a bit of a pull back in the dollar," said Societe Generale strategist Alvin Tan. "The fall in oil is pushing back US bond yields. That is leading the consolidation in the dollar. There is more scepticism about an (Opec) output cut now."
The moves hoisted the euro to an 11-day high of $1.0686, getting a lift too from the election of Francois Fillon as the centre-right candidate in next year’s French presidential election.
The reformist former prime minister is now favourite to become president. According to a flash opinion poll, he would easily beat National Front leader Marine le Pen in a run-off second round. Markets worry about the rightist Le Pen, who promise of a referendum on EU membership menaces the future of the currency bloc.
Italy, plagued by political worries about its referendum on constitutional reform, remained a more obvious concern.
Having lost more than half their value over the past year, Italian banking stocks fell 3% to their lowest in almost two months as Italian government bonds also underperformed the wider rally in fixed income.
Opinion polls predict defeat for the government in what would be the third big antiestablishment revolt by voters this year in a major Western country after Britain’s Brexit vote and Donald Trump’s election victory.
"Fears are that an Italian dissent and resulting market turmoil would dissuade already gutsy investors from daring to participate in desperately needed recapitalisations within a very troubled €4-trillion banking system," said Mike van Dulken, head of Research at Accendo Markets.
Hot metals
As the dollar wilted in the currency markets, gold bounced back to $1,192.0 an ounce from Friday’s low $1,171.5, which was its lowest level since early February.
Industrial metals also remained red hot on hopes of strong demand for property and infrastructure investment in China and the United States.
Chinese steel futures jumped over 6% while iron-ore futures gained about 6% and zinc powered to a nine-year high on the London Metal Exchange.
Asian shares rose 0.4% overnight, led by gains in Hong Kong and Taiwan though Japan’s Nikkei, which has been performing even better than a record high Wall Street in recent weeks thanks to the yen’s fall, ended down 0.1%. "It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump’s policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
In the bond markets, the yield on 10-year US Treasuries dropped almost 5 basis points to 2.323%, off its 16-month high of 2.417% touched last week. Europe’s benchmark, German Bunds, saw their equivalent yield drop three basis points.
US stock futures slipped 0.2% ahead of US trading. Wall Street’s four main indexes all hit record highs last week, a feat last achieved in 1999.
Reuters
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