A brief reprieve. The fear of escalation in the Levant has subsided, at least temporarily, allowing markets to take a small breath of air early this week. Predictable effects in commodities as oil fell back down to $85 per barrel and gold back under $2000 per ounce.
Stock indices began the week on sure footing with the DJI surging 1.58% on Monday and rising a further 0.38% the following day. The S&P 500 followed suit, finishing 1.20% and 0.65% in the black on Monday and Tuesday, as did the NASDAQ Composite, itself climbing 1.16% and 0.48%. Reactions on the European markets were somewhat more muted, the FTSE, DAX and CAC40 still relatively directionless. The Hang Seng hasn’t had the strongest start to this week, closing flat on Monday before falling 1.69% yesterday.
All eyes were once again on the Yen on Tuesday as the Bank of Japan met to discuss the ever-present threat of devaluation of their currency. Hopes of the central bank establishing a firm line in the sand with regards to exchange rates did not materialise. In a very dovish statement, the BoJ revealed it had no plan to raise interest rates from their current target of -0.1%. It did however redefine the 1% cap on the 10-year bond yield as more of a loose ceiling than a hard cap, in a very small step to finally reverse its policy of monetary stimulus. Currency traders were clearly not impressed as USDJPY shot up to 151.7 Yen by Tuesday’s close, the highest monthly close since June 1990.
Expect more volatility on the markets at the end of this week as the Non-Farm Payrolls come in relatively early this month. There is also the Fed Interest rate decision today although this is unlikely to provide any surprises.
