On Monday, the investors looked for clarity despite an array of economic and political uncertainties but gave shares and the dollar the benefit of the doubt, causing a shares and dollar increase.
A heavy week of corporate earning was a big player in stock markets.
With regards to the currency market, the question was about how Friday’s U.S. labor market data would influence the pace of the interest rate rises of the Federal Reserve. Many more jobs were added in the past month than was anticipated, although there was barely any change in hourly wages.
Oil prices climbed following the news that the new U.S. sanctions on Iran may be extended to affect crude supplies.
In the meantime, French government bonds underperformed German benchmarks with a gap that was not seen in four years following the launch of the bid by the French far-right party leader Marine Le Pen for president with a vow to fight deregulated globalization.
Since the was no overarching theme to the market moves on Monday, highlighting how the breakdown of correlations between financial market assets in the past months while investors since the era of ultra-loose monetary policy could be winding up.
There was an increase of 0.2 percent for the pan-European STOXX 600 index (STOXX), which led higher by basics resources shares (SXPP) and after a few positive company results.
MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) climbed 0.6 percent, with Taiwan (TWII) in the lead by adding 0.9 percent.
There was a rise of 0.2 percent for Japan’s Nikkei (N225), with the banks increasing following the signing of the executive order of U.S. President Donald Trump to cut back regulations in the financial industry that were put in place following the financial crisis.
Trade and currencies are most likely to be on the agenda when Trump meets with the Prime Minister of Japan, Shinzo Abe, on February 10 and 11.
China’s CSI 300 stock index (CSI300) climbed 0.3 percent, although investors were cautious after the unexpected raise by the central bank for short-term interest rates on Friday.
In debt markets, French 10-year government bond yields climbed 1.6 basis points to 1.1 percent. The German equivalents, the benchmark for the euro zone, dropped 2 bps to a two-week low of approximately 0.4 percent, pushing the gap between the two to the biggest gap in four years.
“It is very unlikely Le Pen will win, but the situation in France is definitely raising fears among investors,” according to DZ Bank rates strategist Christian Lenk. “French bonds will continue to perform poorly even though there is a lot priced into the market.”
DOLLAR INCREASE
The dollar increased 0.1 percent against a range of major currencies (DXY). On Friday the data showed average hourly earning gained just 0.1 percent, which suggested that any pickup in inflation would be small.
This then caused some analysts to deduce that the Fed would be in no hurry to increase the interest rates.
Currency investors are also waiting for the details on the expected pro-dollar tax and spending initiatives that were pledged by Trump.
Nonetheless, John Williams, San Francisco Fed President announced later in the day that the central bank can prepare to increase the rates this year without them knowing the details of any new U.S. fiscal policies.
The euro weakened on Monday by 0.3 percent to {currency}1.0747. The yen had a 0.1 percent to 112.60 per dollar increase, and the sterling dropped 0.2 percent to {currency}1.2450.
Oil prices increased, in part because of the dollar’s relative weakness, but also because of concern about any extension of the new U.S. sanctions imposed on major oil producer Iran over their missile program.
“The move by the U.S. to impose new restrictions on Iran…it does not increase the risk of further tensions disrupting the oil supply,” said ANZ Bank.
The international benchmark, Brent crude, increased by 9 cents a barrel to {currency}56.92.
Gold increased by 0.2 percent to {currency}1,222 an ounce.
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