Markets:
- Gold up $29 to fresh record at $2842
- S&P 500 up 0.7%
- WTI crude down 62-cents to $72.52
- US 10-year yields down 2.8 bps to 4.51%
- CAD leads, USD lags
The news flow on Tuesday was much slower than a day earlier but the market direction picked up from where we left off as stocks started flat and steadily gained. That was helped out by an intraday reversal in yields with 10s falling to 4.51% from 4.59%.
Naturally, that put downward pressure on the US dollar. It was steady selling as the mood improved, particularly in the latter half of European trading. The moves began to flatten out after midday in the US.
The moves were sizeable, led by another 100 pip decline in USD/CAD, taking the pair to 1.4323, which gets the pair back to January 23 levels. The year-to-date low of 1.4261 is the key support level from here.
The euro finished the job of closing the tariff gap from Monday as it steadily rose about 50 pips in US trading to hit 1.0385.
Adding to the US selling was a soft JOLTS report that highlighted light pressure on wages in the US and may leave the Fed with room to cut rates if the economy underperforms.
Some optimism also came from reports about a Trump-Xi phone call following US tariffs and China counter tariffs. China didn’t hit back too hard and that was good news for the market and Chinese shares (and US ETFs) strengthened strongly as China reopens following the holiday. The call never ended up happening and it’s not clear why but for now we expect it to be rescheduled.
Oil was bounced around on Iran tariff headlines competing with hopes for peace in Ukraine. I strongly suspect that Russia would want oil sanctions removed in any deal.
