Investing.com | May 23, 2017 07:09AM ET
by Pinhcas Cohenh3 The Big News/h3
As the investigation into last night's suicide bombing in Manchester, UK continues, Asian and European markets either fell or remained flat. Investors’ can’t seem to catch a break, as the risk-on, risk-off roller coaster keeps chugging along.
At the same time, short-term traders also can’t get a break, but are finding opportunities where they can as these wild swings provide them with a target-rich environment for investments.
h3 World Events/h3The blast that killed at least 22 people and injured 59, including children, at an Ariana Grande concert in Manchester has been confirmed as the worst terror attack in the UK since the 7/7 bombings in 2005. UK Prime Minister Theresa May has suspended her party's campaigning for the day as a result.
The attach has had a detrimental affect on the markets as well, with traders' risk tolerance sinking to new lows.
In the latest development from the ongoing investigation into President Donald Trump's administration's ties to Russia, the Washington Post has reported that the President had asked intelligence officials to make public statements indicating that there was no evidence of Russian involvement with his election campaign.
In consequence, the yen advanced against almost all FX majors, proving again it's the safe haven currency of our time, gaining 0.23%, whereas the Swissy has lost 0.2%, as of 3:04 EDT.
Not that the yen was the only asset doing well. Gold surpassed the yen; its value rose 0.4%. Treasury bonds have gained the most value, particularly the US 5-year. Its yield declined by 1.20% to 1.7769.
However, the big safe-haven winner – or loser in yield – is the UK 2-year Government Bond, whose yield dropped 0.83 basis points, or 20.16%, and is extremely volatile. This exceptional demand for UK bonds is a direct result of this most recent terror attack in Manchester.
Asian markets and European and US futures are in the red, with the exception of the open Swiss and Dutch markets, which are in the green. Also, the FTSE Futures eked a small gain, possibly as a result of a weaker pound.
The credit rating agency S&P has put out a credit watch, placing Brazil’s debt—which is already rated at 'BB', two steps below the acceptable investment grade—with negative implications. This means the country may be further downgraded in the next three months. The nation's fiscal adjustment is also at risk of stalling amid political uncertainty following allegations of bribery and corruption against President Michel Temer. The warning is likely to create a situation where investors will begin to flee and sell off their assets, but the selloff may provide unusual bargains for the daring, contrarian investor.
US monetary policy remains in focus after recent data showed all was not well for the US, the world's largest economy. Fed Governor Lael Brainard said she's not seeing much progress on core inflation, and investors seem to agree, as Treasury yields aren't able to overcome the March highs due to demand outpacing supply. This would not be the case should traders believe alternate high yields are coming.
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