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Treasuries signal risk off, equities fall globally

By Margaret Yang

Equities – US treasuries, gold and yen rallied yesterday which sent a “risk off” signal to investors as capital seemed to flow back into the above mentioned “safe haven” assets again. US 10 years treasury yields fell as low as 1.73%, down 14bps from 1.877% a week ago. The yen strengthened to 110.42, a level not seen since Oct 2014. As a result, the Nikkei was down another 2.58% to 15,733 as the yen hit a 17-month high. Most of the other Asian markets also came off, except for Shanghai and Jakarta, which rose 1.45% and 0.33% respectively. Singapore’s STI closed 34.4 points, or 1.21% lower,as the slump in oil prices continued to weight on equity markets. German industrial orders showed more weakness than expected (-1.2% vs 0.2% forecast) which led European markets lower; the Euro Stoxx 50 was down 2.43%  The US March ISM PMI came out at 54.5, beating expectations of 54.0 and showing industry expansion. The US market however closed 1% lower.

Commodities - Gold climbed $14 or 1.2% to $1,230. The Relative Strength Index (RSI) of gold hovered around 50%, indicating a lack of a clear direction. It will probably continue in a range bound between $1,210-1,240 in the near term. Crude oil closed lower in 9 consecutive sessions before we saw a rebound last night. The immediate support level for the generic crude oil futures contract is $35, followed by $30. Copper rose marginally after falling 6.5% over the last two weeks.

FX – The Dollar Index June contract rose 0.21% to 94.70. USD has strengthened against most of its major peers except for JPY. AUD/USD retraced further to 0.7570 as commodity price weakness continues to weight on AUD.  The immediate support and resistance levels for AUD/USD are 0.7436 and 0.7812 respectively. USD/RUB rose 0.81% to around 68.7. EUR/USD failed to stay above 1.1400, a key resistance level, and fell to the 1.1360 area due to weaker-than-expected German industrial orders. USD/JPY dipped further to 110.30, breaking below the key support level of 111.00. The next support level is at 110.00. CAD/USD dropped 0.44% to 0.7613 due to lower than expected trade balance data.

market06042016
Crude Oil West Texas - Cash

Key Technical levels to watch:

  • Immediate resistance levels: 40.00.
  • Immediate support levels: 33.65, followed by 26.76.

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.