Daily Market Color

Caution Prevails in Financial Markets with Geopolitical Tensions Taking Center Stage

In the absence of major economic data releases, financial markets opened the shortened trading week with a cautious tone, influenced largely by geopolitical tensions as US relations with Russia remain fractured following last week’s Syrian attacks.  Treasurys edged higher, with yields/swap rates down 1-4 basis points across the curve, bringing the yield on the 10-year note near 2.36%.  Of particular interest to bond markets today will be the Q & A session scheduled with Fed Chair Janet Yellen at the University of Michigan set for 4pm EST as investors look for additional color following last Friday’s mixed payrolls report.  Stock markets traded within a tight range on the day, with all three major indices posting marginal gains of roughly 0.1%.  Additionally, both the US dollar and price of gold were near unchanged for the session.  In the energy space, crude oil notched its fifth consecutive day of gains, its longest streak of the year as a barrel of WTI oil topped $53 for the first time in more than a month.  Today’s 1.5% rise adds to last week’s +3.2% performance, as optimism over an extension of OPEC supply cuts continues to build.

Abroad, concerns over the French presidential election are beginning to escalate again after far-left politician Jean-Luc Melenchon gained momentum in the nation’s latest polls.  The election is now a four-way competition with the potential for a new second round faceoff featuring Melenchon and far-right leader Marine Le Pen, adding further uncertainty to the election’s future outcome.  Following the news, the spread between French and German 10-year bond yields reached its widest since February at 70 basis points.  Additionally, a measure of volatility between the euro and US dollar jumped to its highest reading in more than three months.          

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