Risk Assets Rebound as Syrian Conflict Cools

 

Middle East Tensions Ease

President Trump assisted in calming the nerves of financial markets today as he clarified yesterday’s aggressive comments related to the conflict in Syria.  This morning Trump tweeted that he “Never said when an attack on Syria would take place. Could be very soon or not so soon at all!”  The most detail that he could provide was that a decision would be made “fairly soon” on the response to be taken by the United States.  In Europe the reactions from leaders were mixed, as Germany announced that it would not be part of any military action, but supported sending a clear message to Syria that such an event “is unacceptable”, while British officials were set to meet today to discuss a joint military response with the US.

 

 

Also helping the rebound in risk assets, trade talks with China have seemingly taken a step forward, as today President Trump discussed the possibility that neither side may end up imposing new tariffs.  “‘Now we’re really negotiating and I think they’re going to treat us really fairly,” Trump stated, “I think they want to.”  In addition to the outlook for the trade relationship with China improving, today Trump tasked US trade representative Robert Lighthizer and Director of the National Economic Council Larry Kudlow with looking into the possibility of re-entering the Trans-Pacific Partnership – a trade pact which the US had withdrawn from just over a year ago.     

 

 

Consistently Healthy Jobless Claims

Today’s economic data releases were highlighted by a report from the Labor Department, which showed initial jobless claims in the US holding at levels associated with a robust labor market (sub 300,000) for a 162nd straight week.  The number of new claims for the week ended April 7th fell 9,000 to a seasonally adjusted 233,000 (230,000 expected), and the four-week moving average of claims increased by 1,750 to 230,000.  Also detailed in the report, the number of continuing claims increased by 53,000 to 1.871 million for the week ended March 31st. 

 

 

Major US stock indices posted gains on the day on the improving situation with China and strong earnings reported by Blackrock.  The DJIA led the way with a 1.2% gain, while the S&P 500 was up 0.8%  and the NASDAQ up 1%.  Tomorrow the earnings of the big banks will be in focus in the equity markets with Citigroup, JP Morgan Chase and Wells Fargo all reporting.  US Treasurys sold off throughout today’s trading session, as yields/swap rates increased 4-5bps across the curve, bringing the 10-year note yield close to 2.84% as of the close.  The US Dollar (USD) was mixed on the day gaining 0.3% vs the Euro (EUR) and losing 0.4% vs  the Pound (GBP).  Crude Oil Futures rallied on the day, rising to $67.12 up 0.5%.