Asian markets followed the lead from the US and finished largely lower. The key story over the weekend was Attorney General William Barr’s four-page summary to Robert Mueller’s 22-month Russia investigation. The key takeaways were: No evidence of collusion with the Russians, does not exonerate President Trump on obstruction, and no further indictments. Some Democrats are still determined to pursue on with investigations with President Trump, but that might end up costing them political capital.
President Trump is taking victory laps and he very well should as impeachment fears are alleviated as collusion worries are gone and even if the Democrats come up with abuse of power or corruption charges, they will not have enough votes to do anything about it.
- USD – Treasury Yields tentatively stabilize
- EUR – IFO rebounds, but manufacturing still a problem
- Brexit – Will Parliament take the power over Brexit?
- Oil – Little changed to start the week
- Gold – Supported on global gloomy outlook
USD
The dollar is having a modestly mix start to the trading week as global bond yields tentatively stabilize. The inversion curve aftermath had many traders trigger a safe-haven move that drove down yields down across the Treasury curve. The exoneration (self-proclaimed, but probably true) of President Trump from the Mueller report saw little reaction in the markets, but it does pave the wave to possibly see this administration be able to get some work done. A major infra-structure deal would be difficult to get bipartisan approval, but we may see some Congress get some work done that could be positive for the economy.
EUR
The euro got a little boost after business morale in Germany showed signs of stabilizing for the first time in 6 months. The Munich-based institute survey show business climate improved and came in better than expected for the month of March. The 99.6 climate reading was a beat of the 98.5 consensus and the revised higher 98.7 from the month before. Manufacturing still remains a soar point in the German economy, falling at the quickest rate in over six and a half years. While the data was better, the survey noted that the global economy is not providing any support for the German economy, reinforcing the market’s view that Germany will not rebound until we see China firm up. A trade deal between China and the US, along with additional easing from the PBOC is what German growth will need to see for happy days to return.
Brexit
Today, UK Lawmakers will vote on who takes the power of the timetable of Brexit. Parliament will either vote for various options or PM May will continue having the control. Over the weekend, May had to deal will calls from her cabinet to offer a specific resignation date in exchange for support for her Brexit deal. Giving Parliament the ability to control Brexit means that for one day on Wednesday, Parliament would vote on specific options on a different way to proceed. The last time, this was voted on, it was only defeated by two votes.
The British pound is lower across the board to its major trading partners ahead today’s Parliamentary votes. Global bond markets also appear to be continuing to control the narrative for Gilts. Gilts followed the move lower last week from 1.20% to 1.04%, with the start of the week showing some stabilization.
Oil
Crude prices are hovering around $59 a barrel, as markets try to figure how strong the US economy will be for the rest of 2019. Slower growth is a global theme, but for the US, fears their booming economic cycle could be coming to an end much sooner were triggered on last week’s yield curve inversion with 3-month and 10-year Treasury yields, the first since 2007. A weakening economy, combined with a pause in the record making US production, the weekly Baker Hughes rig count showed the fifth straight weekly decline, will help alleviate glut concerns.
Gold
Gold was slightly higher in early trade as safe-haven demand remains firmly in place. A slow start to the trading week, saw the German IFO economic institute report the business climate index improved, a nice surprise following last week’s dismal PMI data. Gold remains in a wait-and-see mode and today’s session could be choppy if stocks do not have any major moves as investors await tomorrow’s wrath of US housing data.
