- Geopolitical worries has equities on the defense
- Curves flatten on Ukraine headlines
- Safe haven bets supports gold
The German DAX has been on the defensive all day, especially after Ukraine’s comments of a Russian invasion. It’s currently down -1.29% from its all time high and knocking on the door of Monday’s bottom (9,414). Through here with any momentum, all should starts to swing things more bearish with 9,334 Fibo of this month’s gains being the next key level on the downside.
Gold is up today ($1,292.50 +0.71%), but off its intraday highs, following today’s US economic news – preliminary GDP beat expectations (+4.2% vs. +4.0%), while US weekly jobless claims fell -1k. A stronger labor market does not signify the need for ‘extraordinary’ monetary conditions. The uptick in Ukraine/Russian tension in being felt in both metals and energy markets. Gold’s weekly resistance remains untested at $1,299-1,300 while support moves up to $1,280.
Both the Bund and Gilt curves are flatter on the geopolitical headlines. Ukraine President Poroshenko’s invasion comments has sent December 10-year Gilt prices to new highs and managed to flatten 2/10’s for Bunds and Gilts, respectively.
The periphery bonds are the worst performers as investors seek sanctuary in the go to safer haven UK and German sovereign debt market. The 10-year Greece/Germany spread has been the worst performer (+20bps wider to +470bsp). Outright 10-year Greek bonds have backed up from the June low at +5.475% to just shy of +5.80%. Portugal is the second worst offender, and this after outperforming for most of this week – 2.95% was this week’s low and technically, through +3.25% will be a concern to the market.