Friday, 10 June 2016

Yields, stocks slip as yen rises on safe-haven bid

U.S. Treasury yields fell to three-and-a-half month lows on Thursday and the yen rose as falling oil and stock prices increased demand for low risk assets.

An index of world equity markets snapped a five-day gaining streak. Oil prices dipped as traders took profits after three sessions of gains.

The yen, which investors prefer in times of market uncertainty, reached a three-year peak against the euro EURJPY and five-week high versus the U.S. dollar JPY.

"It's generally a cautious mood today. You have stocks lower and yields lower," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.

The dollar index, which tracks the greenback against the euro, yen and four other currencies .DXY, rebounded from five-week lows set on Wednesday. It was up 0.34 percent at 93.905.

The greenback's gains were supported by an unexpected drop in U.S. jobless claims and a stronger-than-expected rise in wholesale sales in April, soothing some worries about the U.S. economy decelerating in the second quarter.

Oil, which earlier hit a 2016 high helped by supply worries, was pressured by profit taking and the firmer dollar. A stronger dollar makes oil dearer for holders of other currencies.

The MSCI world equity index of shares in 45 nations, was down 0.75 percent. The index pulled back from a six-week high hit on Wednesday, having rallied on buoyant crude oil prices and an encouraging assessment of the economy by Fed Chair Janet Yellen on Monday.

On Wall Street, stocks fell after three days of gains, weighed by financials and energy companies.

The Dow Jones industrial average .DJI fell 70.23 points, or 0.39 percent, at 17,934.82, the S&P 500 .SPX lost 9.33 points, or 0.44 percent, at 2,109.79 and the Nasdaq Composite .IXIC dropped 20.83 points, or 0.42 percent, at 4,953.81.

Europe's broad FTSEurofirst 300 index .FTEU3 was down 0.95 percent at 1,340.08, weighed down by weakness among commodities-related stocks.

Earlier, Japan's Nikkei .N225 fell nearly 1 percent, hurt by the stronger yen. Financials and banking stocks led the losses amid lower bond yields.

In the bond market, U.S. Treasury yields dipped as falling oil and stock prices increased demand for safe haven debt amid concerns about global growth.

British and German sovereign debt yields fell to record lows, driven by concerns about Britain's referendum on European Union membership later this month and the European Central Bank’s commencement of its corporate bond purchase program.

That has further increased the attractiveness of Treasuries, which offer far higher yields than European, Japanese and other major sovereign bonds as the U.S. economy shows greater strength than those nations.

"It's a demand for securities and yield," said Tom Tucci, head of Treasuries trading at CIBC in New York.

Benchmark U.S. 10-year notes US10YT=RR gained 1/32 in price to yield 1.671 percent, the lowest since February 24.

Brent crude LCOc1 was down 0.74 percent at $52.12 a barrel, while U.S. crude CLc1 was down 0.92 percent at $50.76 per barrel.

The firmer dollar knocked copper to its lowest in nearly four months. Three-month copper CMCU3 on the London Metal Exchange tumbled 2 percent to a low of $4,485.50 a tonne.

Spot gold XAU= hit a three-week high and was up 0.68 percent to $1,270.36 an ounce.


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