Opening Bell: Dollar, Bonds Fall As Yen, Gold Rise On Trump Jr.

With risk-off now being embraced by investors, US 10-year Treasury yields declined 1.27 percent within the first two hours after the release of the latest developments in the Trump Jr.-Russia affair. They've continued to fall to a total to1.60 percent as of 2:00 EDT. Similarly, the price of gold jumped 0.64 percent within the first hour, and rose as much as 0.97% as of 1:00 EDT.

After the the release of the news, the S&P 500 sharply declined by 0.63 percent, but bounced right back, ending the day down just a negligible 0.1 percent lower. This is a case of everyone fearing what others will do. So, they're the first to sell off, but upon realizing the news isn't that big a deal, they rush back in.

This morning, European equities advanced; the Euro Stoxx 50 was up 0.55 percent at time of writing, the DAX was up 0.44 percent and the CAC 40 advanced 0.7 percent on energy shares. The French benchmark index bounced off its April low, following oil's corrective rally.

While safe haven assets rise—a clear risk-off indicator, equities investors continue to embrace risk-on sentiment. This aberration began with the November US elections, when both risk and safe haven assets started rising in tandem, de-calibrating market components and leaving investors with disparate economic outlooks on how markets will play out.

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Yesterday, Bloomberg reported that “Stocks had been inured to Washington tensions since Comey [when they] drop[ped].” In fact, since the Brexit vote, equity investors have become more daring in their disregard for political risk, while currency and commodity traders seem to have kept their political savvy. It took equity markets three days to digest the shock of the June 24, 2016 Brexit vote, three hours to come to terms with the shock of the November 8 US presidential vote and three minutes to skip back the significance of the December 4 Italian referendum. Does this suggest that equity investors are wrong? Try telling that to investors who’ve seen their equity portfolios rise 15 percent in eight months since the US elections, and 19 percent since the Brexit vote.

The Tokyo Price Index opened 0.28 percent lower, declined as much as 0.64 percent and settled at 0.47 percent. However, let’s remember that the yen, had strengthened as much as 0.35 percent at the same time, which is proportionate to the decline in Japanese stocks, while investors are nervous ahead of Yellen’s testimony before Congress.

In Hong Kong, traders were not fazed by political risks, as the Hang Seng was up 0.8 percent, crossing over the 26,000 round psychological price level and resuming a rally of 2.8 percent this week. The index seems to be heading for its best weekly performance since mid-March, as investors focus on the rise of mainland Chinese blue-chips, up 1.5 percent. The index is on course for its best performance in nine weeks.

Oil recovered 3.13 percent yesterday, and reversed 4.6 percent from the low of the day on reports of a decline in stockpiles. Inventories declined by 8.13 million barrels last week, according to an API report—the biggest drop since September when compared with the US Energy Information Administration data. The API report followed the EIA cut in its 2018 oil output forecast to 9.9 million barrels a day, down from its 10.01 million estimated in June.