Stocks slightly higher, commodity currencies stay under pressure

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  • European stock markets trade slightly higher despite another political tailspin coming from the US.
  •  Commodity-related currencies stay under pressure.
  •  Global bond yields take another step back.

 
Beginning with the currency market one may notice that the Japanese yen has been able to hold its prior gains so far while the commodity-related currencies such as CAD, NZD and AUD have stayed under selling pressure. On the surface, it should herald a risk-off mode, however, it has yet to be seen across equities as they’ve performed quite well as of yet. Of course, the gains are nothing compared to those seen across the pond over the course of the past weeks (notice that while Wall Street has already wiped off its post-February sell-off losses, European benchmarks have still a lot to do in order to obtain the levels seen at the end of January).


The macroeconomic calendar does not abound in many notable events nonetheless the final release of EMU inflation for February did catch market participants off-guard. According to the Eurostat CPI grew just 1.1% in February slipping from 1.3% seen in the prior month and missing the initial print at 1.2%. The prime reason were lower food prices - the similar case was seen elsewhere as well. What deserves more attention if the fact that the average CPI rate has been 1.22% (after the data for two months) pointing to the lacklustre pace of price growth in comparison to the latest ECB staff macroeconomic projections looking for a 1.3% increase in the first quarter. If the forecast is to materialize, the March inflation data would have to exceed 1.4% (excluding rounding).


Turning to the bond market one may spot that most of them have been thriving thus far meaning noticeable falls in yields. Among the best bonds are Hungarian, Russian and Polish - the latter benefit from a lower than expected inflation reading for February and subtly lower than forecast wage growth released earlier today. On the flip side, the Turkish bonds are losing momentum as the 10Y yield is gaining 5 bps following the latest tensions between Turkey and Syria. To be precise, the Turkish government slammed a motion approved by the European Parliament on Thursday calling for a halt to Ankara’s military offensive in northern Syria’s Afrin region.


The political reshuffle in the White House does not seem to be coming to an end any time soon. After firing Gary Cohn and Rex Tillerson US President Donald Trump is purportedly set to fire his national security adviser McMaster before meetings with North Korea due in May, according to multiple source which reported to CNN. Financial markets have barely reacted to those revelations (except for another decline in the USDJPY), however, it underlines that we could be still a long way off from the end of the political reshuffle in the US therefore there is the likelihood that political threads will prevail those concerning macroeconomic ones.


When Bitcoin futures were being introducing to the CBOE the hype related to cryptocurrencies was outstandingly high. After several months later the same exchange is reportedly planning to expand its crypto-related activity beyond Bitcoin futures. Namely, it wants to launch derivatives contracts on other virtual currencies. According to CBOE President Chris Concannon "the vision is to have a crypto complex", however, he did not specify cryptocurrencies they are targeting but apart from Bitcoin the biggest coins are Ethereum, Ripple, Bitcoin Cash as well as Litecoin.


Looking forward, there are some second-tier macroeconomic readings coming from the US economy - the housing data followed by consumer sentiment measured by the UoM.