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Increased Demand for Risk Underpinning Stocks, Pressuring U.S. Dollar

James Hyerczyk
On Monday, the White House announced that President Trump had received a request from North Korea’s Kim for a follow-up meeting after their historic meeting in Singapore in June 2018. U.S. Treasury yields were unchanged Monday after Friday’s strong reaction to the better-than-expected U.S. Non-Farm Payrolls report. The U.S. Dollar is trading mixed against the major currencies. It’s losing ground against the Australian, New Zealand and Canadian Dollar as well as the Euro and British Pound. U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Tuesday after a late session sell-off on Monday led to the markets giving back their earlier gains.

Asia stock markets are trading higher Tuesday, underpinned by a firm U.S. session on Monday. The markets are being boosted by a White House announcement that it was in the process of coordinating a second meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un.

At 0423 GMT, Japan’s NIKKEI Index is trading 22641.27, up 268.18 or 1.20%. Australia’s S&P/ASX 200 Index is at 6178.80, up 37.10 or +0.60%. China’s Shanghai Index is at 2677.54, up 8.05 or +0.30%.

On Monday, the White House announced that President Trump had received a request from North Korea’s Kim for a follow-up meeting after their historic meeting in Singapore in June 2018.

Described by the White House as a “very warm, positive letter,” press secretary Sarah Huckabee Sanders informed reporters at the press briefing on Monday that the administration was open to the request and was “already in the process of coordinating” the meeting.

While the news about North Korea may have provided some optimism for investors, gains were likely limited by concerns that a trade deal between the U.S. and Canada is not yet in place. Furthermore, Trump could announce an additional $267 billion of Chinese imports, on top of the $200 billion already in place.

U.S. Treasury Markets

U.S. Treasury yields were unchanged Monday after Friday’s strong reaction to the better-than-expected U.S. Non-Farm Payrolls report. If you recall, the headline beat the estimate, but it was the jump in Average Hourly Earnings that cemented a rate hike by the Fed in September.

The yield on the benchmark 10-year Treasury note held steady at 2.937 percent, while the yield on the 30-year Treasury bond was relatively flat at 3.085.

Forex

The U.S. Dollar is trading mixed against the major currencies. It’s losing ground against the Australian, New Zealand and Canadian Dollar as well as the Euro and British Pound. However, it’s up against the Japanese Yen. Firm equity markets suggests the dollar is being pressured by increased demand for higher risk assets.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Tuesday after a late session sell-off on Monday led to the markets giving back their earlier gains. Prices are being supported by looming U.S. sanctions against Iran’s petroleum industry. However, prices are being capped by signs that increased supplies by other major producers, including the United States and Saudi Arabia, could make up for the disruptions from Iran.

This article was originally posted on FX Empire

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