Risk-Off Trading Resumes as Geopolitical Concerns Linger

US financial markets exercised caution again today as volatility persisted across asset classes amid mounting geopolitical tensions.  With the intention to help curb such concerns, US Secretary of State Rex Tillerson met with Vladimir Putin in Moscow to discuss Russia’s continued support of the Syrian government after the recent conflict, however the three-hour meeting reportedly concluded without major progress made.  US Treasurys resumed yesterday’s rally as yields/swap rates fell an additional 2-4 bps across the curve, bringing the yield on the 10-year note near 2.27%.  Also reflective of the risk-off sentiment, gold gained for a second straight session, rising 0.75%, while major US stock indices finished 0.3%-0.5% lower, led by losses in industrial shares.  The US dollar declined 0.5% against major currencies following comments made by President Trump stating that “our dollar is getting too strong.”  Trump went further to express his view that the Chinese government has not been manipulating its currency, representing a significant retreat from his stance during the presidential campaign as he attempts to gain China’s support in dealing with North Korea. 

US import/export price data during the month of March highlighted economic reporting on the day.  On pace with expectations, import prices declined 0.2% last month, bringing the YoY rise to 4.2%.  The largest drop in the past seven months was mainly attributed to a 3.6% decline in petroleum, which had been weighed down by concerns over a global supply glut.  By country, import prices declined the most from Canada (-1.3% MoM) while the EU (+0.1%) and Japan (+0.2%) saw marginal rises.  Conversely, export prices increased 0.2% last month, led by gains in agricultural prices.  YoY export prices rose 3.6%, marking a fourth consecutive annual increase after seeing contractions in the previous 2.5 years.  Other economic data released today included a report from the Treasury Department detailing $176 billion budget deficit in March that was comprised of receipts of $217 billion and spending of $393 billion.  In March 2016, the US government recorded a deficit of $108 billion.