Investing.com | Jun 06, 2017 06:15AM ET
by Pinchas Cohenh2 The Big News/h2
Two hours after Asian markets opened, stocks fell as the yen shot up 0.65% to 1.0973, reaching its highest level in a month. The "other" safe haven asset, gold, climbed 0.34% to an even $1,287, while 10-year Australian and Japanese yields reversed daily gains, falling 1.13% and 14% respectively.
While investors initially drove up the price of oil on concerns that the Gulf diplomatic crisis would interrupt supply, oil still closed yesterday near Friday’s 3-week intraday low. The commodity is poised for its sixth daily consecutive decline, its longest losing streak since March.
The pattern of equities losing value in favor of local currencies also occurred in the Australian market, where stocks maintained losses while the Aussie rose, even after an initial loss following the RBA's announcement to keep interest rates on hold at 1.5 percent for a tenth consecutive month, due to “sub-par growth.”
The S&P 500 closed lower on Monday, after recent US economic data indicated steady growth. That could be viewed as a sign that investors remain hopeful even as economic analysts cite the recent string of disappointing data as a reason to be bearish about US economic growth. Economists characterize the current situation as the slowest expansion in three years, pointing to recent GDP numbers and the disheartening US employment report as proof.
All this just after the Fed voiced its most hawkish position on growth—and a related rate hike—since the Great Recession. Even the silver lining, the unemployment rate falling a tenth of a percent to 4.3%, a 16-year low, shouldn’t be celebrated. A deeper look reveals that this was due to people giving up on their “unemployed” status, skewing the numbers behind the headline statistics.
If the employment rate is likely as low as it's probably going to go, why are there growing signs of equity investors losing heart? Perhaps investors are realizing that Trump’s 3% growth target is not going to happen; perhaps they believe that the markets' overvalued prices are becoming less and less justified; or perhaps confusion is ramping, right before markets come tumbling down?
Still, analysts are betting that there is a 90% chance of a June rate hike, saying the Fed has a macro view, which has been repeated multiple times by Fed regional presidents over the past weeks.
When it comes to equities however, investors will probably await the outcome of former FBI director James Comey’s testimony and the UK elections.
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