Euro slips, bonds gain as investors turn cautious: Markets wrap

Bloomberg.- The euro extended declines and bonds rose as European political risk ensured an ongoing demand for havens. The dollar edged higher before the release of Fed minutes.

Europe’s currency dropped a fourth day, briefly passing 1.05 per dollar for the first time in more than six weeks as sovereign bonds across the region advanced. Germany’s DAX Index of stocks, already at an almost two-year high, crossed the 12,000 level before paring gains. Oil fell from the highest price in more than a week amid speculation about the effectiveness of OPEC’s supply curbs and forecasts for another expansion in U.S. crude stockpiles.

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Investors in Europe seem increasingly divided, with French presidential elections and the U.K.’s Brexit plans driving demand for the safest debt and optimism for global economic growth and improved corporate earnings supporting stocks. Traders will next turn their focus to minutes from the U.S. Federal Reserve’s latest meeting, which may offer more clues on the path of interest rates in the world’s biggest economy.

Here are some events that investors are watching out for:

– The Fed releases minutes Wednesday, possibly giving investors a look into how members see Trump’s policies. Data should show the U.S. housing market perking up at the start of the year.
– It’s International Petroleum Week in London and top OPEC, government and company officials are attending.
– Legislators in the U.K. will consider changes to the Brexit bill next Monday and Wednesday that may address the rights of EU citizens in Britain and give parliament a binding vote on the final deal.

Here are the main market moves:

Stocks

– The Stoxx Europe 600 Index pared gains to trade little changed as of 7:30 a.m. in New York, after earlier climbing to the highest level since December 2015, while volatility on the index fell to the lowest since mid-2014.
– Miners led declines in the index after Goldman Sachs Group Inc. strategists said commodity markets need proof of demand to rally further.
– The MSCI Asia Pacific Index was at the highest level since July 2015 as Chinese shares traded in Hong Kong resumed a rally. Japanese equities managed to end higher even after fluctuations in the yen pressured the Topix.

Currencies

– The Bloomberg Dollar Spot Index rose 0.1 percent, recouping earlier losses. The yen led advances in major currencies, strengthening 0.5 percent to 113.11 per dollar, following two days of declines.
– The euro dropped 0.3 percent to $1.0505 after touching a six-week low, while the pound reversed early gains, weakening 0.3 percent to $1.2438.

Bonds

– The yield on 10-year Treasuries fell two basis points to 2.42 percent.
– Yields on German bunds due in a decade fell four basis points to 0.26 percent, while that on two-year notes retreated four basis points to 0.91 percent as demand for French election hedges jumped.
– The difference between German five-year bonds and their equivalent interest rate swap spread hit the highest level on record.

Commodities

– Oil fell from the highest price in more than a week amid speculation about the effectiveness of OPEC’s supply curbs and forecasts for another expansion in U.S. crude stockpiles. West Texas Intermediate crude lost 0.5 percent to $54.05.
– U.S. natural gas fell to a six-month low as warmer-than-normal weather continued to reduce demand for the heating fuel. Futures for March delivery fell 0.9 percent to $2.541 per million British thermal units, bring the decline in the last four days to 13 percent.
– Copper dropped 1.1 percent, leading a decline in most industrial metals lower amid signs of a slower-than-expected demand recovery in China after Lunar New Year holidays. Nickel fell 0.7 percent.

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