Checkout
Cart: $0.00 - (0 items )

Jitters creep back into markets

Tuesday 12:30 BST

What you need to know
● European and US equity gauges mixed
● Vix index sits at four-month high amid wariness over earnings
● Gold and Japanese yen advance as investors seek bolt holes
● Brent crude stalls after recent strong run
● The euro gains but French bond yields rise amid election jitters
——————-

Hot topic

Lingering geopolitical concerns, a holiday-shortened week delivering thin trading conditions, and caution ahead of the corporate earnings season, are combining to leave global markets in tentative mood.

Equity benchmarks are struggling for traction and many perceived haven assets are signalling investor angst.

The CBOE Vix index, an option-based measure of expected volatility for US stocks known as Wall Street’s fear gauge, jumped 9.2 per cent to 14.05 on Monday.

That is well below the Vix’s long term average of around 20, but was still its highest close in more than four months and the bounce caught traders’ attention because it came alongside a 0.1 per cent advance for the S&P 500 index. The Vix and S&P 500 tend to have an inverse correlation.

“US indices held on to fractional gains following the lightest-volume session of 2017 to date,” noted Ian Williams, strategist at Peel Hunt. “Investors were cautious ahead of the Q1 reporting season.”

Index futures suggest the S&P 500 will shed 2.5 points to 2,354.5 when trading gets under way later in New York.

Investor demand for supposedly safe investments has picked up recently, with missile tests by North Korea and a US missile strike on Syria lifting the prices of assets such as government bonds, gold and the Japanese yen.

That trend is back in play again on Tuesday. The yield on 10-year US Treasuries is down 1 basis point to 2.35 per cent, while equivalent maturity German Bund yields are steady at 0.22 per cent, near their lowest in five weeks.

In contrast, the yield on French 10-year paper is up 4bp to 0.97 per cent as worries about the outcome of the country’s general election see investors demanding a higher premium for lending to Paris.

The yen is 0.3 per cent stronger at ¥110.58 per dollar, while gold is up 0.3 per cent to $1,258 an ounce.

Equities

The softer US futures are damping risk appetite across many bourses.

The pan-European Stoxx 600 index is up barely 0.1 per cent as banks and oil companies dip but miners advance.

The stronger yen put pressure on Japanese stocks, particularly those of exporters, with the benchmark Topix slipping 0.3 per cent.

Hong Kong’s Hang Seng index fell 0.7 per cent. Guotai Junan Securities, China’s third-biggest brokerage, was flat as it began trading on the Hong Kong Exchange, after its $2.1bn initial public offering, the world’s second-largest this year. On the mainland, however, China’s Shanghai Composite was up 0.6 per cent.

Commodities

Oil prices are stalling after a two week rally partly propelled by concerns about Middle East supply disruptions.

Brent crude, the international benchmark that brushed $50 a barrel on March 27, is up 0.1 per cent to $56.06 a barrel.

West Texas Intermediate, the main US contract, is down 0.1 per cent to $53.03.

Forex

The dollar index, a measure of the US currency against a basket of global peers, is down 0.2 per cent at 100.86 after dropping 0.2 per cent on Monday. Traders are continuing to absorb the implications for US monetary policy of last Friday’s meek jobs data.

The euro is up 0.2 per cent to $1.0611 after data showed an unexpected contraction in eurozone industrial output but a multiyear high for German economic confidence.

News that UK inflation stayed at 2.3 per cent in March initially gave a boost to sterling, but the currency gave back a chunk of its gains and is trading up just 0.1 per cent to $1.2425.

The South Korean won continues to struggle in the face of tensions with Pyongyang, softening by 0.2 per cent to 1,144.27 per dollar, a near four-week trough.

Easing concerns about the country’s economic policies are helping the South African rand gain 1.1 per cent to 13.7925 per buck. After hitting 12.3074 at the end of last month, its strongest level since July 2015, the rand had plunged following the sacking of finance minister Pravin Gordhan and subsequent downgrade of the country’s credit rating.

Additional reporting by Peter Wells in Hong Kong

For market updates and comment follow us on Twitter @FTMarkets