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The Dollar's Slippery Slope: 5 Things The Global Markets Are Talking About Today


Rising geopolitical tensions dominated trading Wednesday morning, sending global equities and futures lower as India clashes with Pakistan.

The yen strengthened along with U.S. Treasuries as the market waited for part two of Federal Reserve Chairman Jerome Powell's testimony to Congress. At Tuesday's testimony, Powell gave no indication that the Fed is prepared to alter monetary policy any time soon.

Across the pond, Britain's Prime Minister Theresa May said if a vote on her Brexit deal by March 12 failed, she would offer a vote on a no-deal Brexit and then a vote on extending Article 50. However, May indicated that the third vote would only allow a "short, limited" extension of Article 50. She also said this extension still would not rule out a no-deal exit.

Elsewhere, crude oil prices are climbing, reversing some of the losses from earlier in the week that were driven mostly by criticism from President Trump that prices are too high.

With all this in mind, there are five things the global markets were talking about on Wednesday.

1. Global Bourses Post Mixed Results

In Japan, the Nikkei closed higher overnight as investors bought into defensive stocks and real estate firms, and took profit from machinery shares that had rallied on progress in Sino-U.S. trade talks. The Nikkei share average gained 0.5 percent.

Down-under, Australian shares ended higher overnight on strength in financial stocks, though some investors stayed cautious while waiting for U.S. President Donald Trump's summit with North Korean leader Kim Jong Un in Hanoi and details on what a trade agreement with China might contain. The S&P/ASX 200 index rose 0.4 percent. In South Korea, the Kospi closed about 0.4 percent higher.

Stocks closed mixed in China overnight, following Powell's testimony that the Fed will shift towards a more "patient" approach on policy in the face of a slowing economy. The blue-chip CSI300 index fell 0.2 percent, while the Shanghai Composite Index rallied 0.4 percent. While in Hong Kong, the Hang Seng index traded down 0.5 percent.

2. Oil Rallies With OPEC Set To Continue Cuts

Oil prices have rallied overnight after a report of declining U.S. crude inventories and as OPEC+ seems content to stick to its supply cuts despite pressure from President Trump.

Brent crude futures were at $65.48 per barrel, up 0.4 percent from Tuesday's close.
U.S. West Texas Intermediate (WTI) crude oil futures were at $55.89 per barrel, up 0.7 percent.

Data released Tuesday by the API showed that U.S. crude oil inventories fell by 4.2 million barrels in the week ending February 22.

Crude oil prices have generally received support this year from supply curbs by OPEC+, which agreed in 2018 to cut output by 1.2 million bpd to prop up prices and has indicated it will continue to withhold supply despite pressure from Trump.

3. Strong Spanish Bond Sales Are A Positive Sign

Spanish government bond yields were holding close to their two-year lows on Wednesday after a very strong 15-year bond sale. Even the eurozone periphery bonds were in demand thanks to progress on geopolitical issues.

Spain's 10-year bond yield fell to a 28-month low of 1.126 percent after Tuesday's sovereign sale, and was holding near that level Wednesday. Italian and Portuguese equivalents were pulled lower too.

4. Dollar's Slippery Slope

The U.S. dollar was on soft footing following Powell's semi-annual testimony in Congress and seems well contained within recent quarterly ranges for G10 currency pairs. The Fed chair reiterated that policy decisions would continue to be "data dependent" and that in no rush to make a judgment about changes in policy.

Sterling was trading atop its six-month high as Theresa May bought herself more time to secure a Brexit agreement. With a little more than a month to go before the U.K.'s scheduled exit from the European Union, lawmakers have yet to settle on a deal with the bloc.

The EUR has been unmoved by the weakening consumer sentiment in Europe, given that it had already risen to the key psychological level of €1.14 on the back of a weaker dollar. Analysts are anticipating that the single unit will begin to struggle to rise from here.

5. Eurozone Slowdown Fears Underlined By Weak Money And Data

Data released on Wednesday showed that bank lending to eurozone businesses slowed sharply last month, supporting recent evidence of an economic slowdown in the region.

According to the European Central Bank, lending to non-financial corporations grew 3.3 percent, down from an annual growth rate of 3.9 percent in the previous month.

The ECB's key indicator of the money supply, M3, grew 3.8 percent y/y through January, down from December's 4.1 percent growth rate. Markets were looking for 4 percent growth.

A positive in today's report was that lending to households was stable in January. It rose 3.2 percent y/y, the same as in December 2018.

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsNews Bonds Eurozone Commodities Forex Markets


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