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Investors Favors Bonds, Gold, Japanese Yen, Swiss Francs as Safe Havens

Global stock markets rebounded Tuesday after China’s central bank fixed the Yuan at a slightly stronger rate, soothing fears that a protracted trade war between the U.S. and China would spill over into a currency war as well.

The slight gains followed a rout in global markets Tuesday after the yuan dropped past 7 to the dollar, spurring the United States to label Beijing a currency manipulator.

Safe-haven assets, including bonds, gold, and currencies like the yen and Swiss franc, dipped as investors moved tentatively back into the euro, sterling and some emerging-market currencies. Yet investor sentiment remained fragile.

On Wall Street, the Dow Jones Industrial Average.DJI rose 56.54 points, or 0.22%, to 25,774.28, the S&P 500 .SPX gained 9.73 points, or 0.34%, to 2,854.47 and the Nasdaq Composite.IXIC added 51.36 points, or 0.66%, to 7,777.40.

“The markets are now scrambling to factor in the possibility of the United States imposing not only an additional 10% of tariffs on Chinese imports but the figure being raised to 25%.” Goldman Sachs also said it no longer expects a trade deal to be struck before the November 2020 U.S. presidential election. Morgan Stanley said more tit-for-tat tariffs could tip the world economy into recession by the middle of next year.

Though U.S. Treasury yields had edged back up to 1.74% from October 2016 lows of 1.672%, German yields stayed down at minus 0.54%. Markets are now pricing in a 100% chance the European Central Bank will cut its already negative interest rates again next month.

China’s offshore Yuan had stretched the previous day’s slide, briefly weakening to 7.1382 CNH=D4, the lowest since international trading in the Chinese currency began in 2010. But it pulled back to 7.0469 after Beijing’s firmer-than-expected fixing on Tuesday.

The Japanese yen, a perceived safe-haven in times of market turmoil and political tensions, touched a seven-month high of 105.520 per dollar JPY= before dropping back as far as 106.700 in volatile trade. Oil prices rebounded slightly from big falls in recent sessions, but Brent crude remained near seven-month lows around $60 a barrel due to escalating trade tensions between China and the United States. Brent crude oil futures LCOc1 rose 0.3% to $60.01 per barrel. U.S. crude rose 0.3% to $54.87.

Spot gold XAU= stalled after advancing to a six-year peak of $1,474.80 an ounce as investors sought safety. People are just rebalancing their portfolios in favor of bonds, gold, Japanese yen, Swiss francs and the usual safe havens.

This post first appeared on Dalal Street Winners Advisory Servi, please read the originial post: here

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Investors Favors Bonds, Gold, Japanese Yen, Swiss Francs as Safe Havens


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