market:
- Gold rises $60 to $1,928
- Crude oil rose $4.74 to $87.65
- US 10-year Treasury yield fell 7.9bps to 4.62%
- S&P500 fell 0.6%
- Swiss Franc leads, New Zealand dollar lags
This is not the kind of price movement anyone wants to see when bombs are flying in the Middle East. The strength of the gold and oil bull markets suggests real fears of broader conflict beyond Gaza. At best, these movements, mixed with short cover, signaled alarm, but as the day wore on, the movements grew louder and felt more like something ominous.
The Swiss Franc was chosen as a safe haven and a euro/Swiss Franc sell-off began in the middle of European trading and extended until the end of European trading.
The pound sold off for a second day, dropping 40 pips to close at the day’s low of 1.2134. Two days of declines in the cable market erased the gains of the past five days, leaving doubts about a sustained recovery.
The three-day decline in NZD/USD has brought the pair back within range of this year’s September lows, with the antipodean currency continuing to be a big laggard. This was the week China announced additional fiscal stimulus, highlighting the level of concern.
U.S. Treasury yields were less of a factor today as the 30-year Treasury yield fell 11 basis points on safe-haven buying. That’s a big change after yesterday’s terrible auction.
The next big question is what happens after the weekend. There’s a risk we won’t be in World War III by the time the market reopens (though Dalio says there’s a 50-50 chance of it happening), and if we do, the safety premium Some of it should fade.
Have a safe weekend!