Tuesday, April 2, 2024

Capital Markets: "Gold, Oil, and Interest Rates Rise"

From Marc Chandler at Bannockburn Global Forex:

Overview:  The market put more weight on the rise in the US ISM manufacturing survey than the downward revision to the manufacturing PMI and the unexpected back-to-back decline in construction spending. US rates shot up and lifted the greenback. The Dollar Index made a new high for the year, a little above 105, which had been anticipated by the new lows recorded by the Bannockburn World Currency Index (a GDP-weighted basket of the currencies of the 12 largest economies) last week. The two-year Treasury yield surged almost 9 basis points to settle above 4.7%, its highest in two weeks. It is slightly lower now. 10-year yield jumped 11 basis points, the most since January CPI was reported on February 13. It is slightly firmer today to approach the Q1 24 high (on March 18) near 4.35%. The dollar bloc and Scandis have been joined by sterling, posting minor gains against the dollar. With a soft manufacturing PMI and soft CPI due Thursday, the Swiss franc has been sold the hardest and is off around 0.5%. Most emerging market currencies are softer, but the Turkish lira is extending yesterday's recovery and the South African rand, and the Mexican peso are firmer.

The Hand Seng and mainland shares that trade there rallied more than 2% today, even though the CSI 300 was off 0.4%. Taiwan's Taiex rallied 1.2%, led by the semiconductor sector. European markets re-opened from the extended holiday and the Stoxx 600 resumed where it had left off and extended its advance for the fifth consecutive session. US index futures are trading a little softer. The jump in US rates and the firmer European final manufacturing PMI readings are pushing up European 10-year rates by 5-7 bp, with UK Gilt yields jumping nearly 11 bp. The firm dollar and higher rates have not deterred gold buying. It reached new record high slightly below $2267. May WTI is also taking another leg higher, encouraged perhaps by the better PMIs but also news that Mexico will be cutting Mayan crude exports to boost domestic gasoline and diesel output. It is a sour crude and the cut in exports comes as the US reimposes sanctions on Venezuela, which also is a source of sour crude. May WTI is rising above $85, last year's high....