Markets Steady into the Trading Week Ahead
Wall Street closed the trading week on Friday little changed after weaker then expected PPI data was countered by mixed earnings numbers. The Dow took a hit on the back of lower bank earnings, closing the day down 0.31%, with the S&P and Nasdaq both finishing the trading day close to flat, up 0.08% and 0.02% respectively. US treasury yields took a significant hit after the weaker PPI print with the rate sensitive 2-year hitting its lowest level since May, losing 12 basis points to trade at 4.12% and the 10-year sliding back down to finish the day at 3.96%. The dollar continued to trade in familiar ranges against the majors whereas both Gold and Oil spiked higher on Middle East tensions before heading back lower towards the end of trading.
Investors Maintain a Wary Eye on Middle East
Investors are keeping a close eye on increasing tensions in the Middle East as the potential for further escalation notched up after strikes on Houthi bases by the US and UK on Friday. The Iran backed Houthis who control much of Yemen have been attacking shipping in the Red Sea for weeks causing shipping companies to divert their vessels onto longer, more costly routes. The Houthis claim their actions are a reaction to the conflict in Gaza and investors are concerned that geopolitical tensions could rise swiftly in the region. Markets have been relatively calm so far with little signs of the ‘flight to safety’ trades that could be expected, although Oil and Gold did spike. Any further developments could however, see much stronger moves across markets with haven products Gold and the dollar moving higher as well as the inevitable move in Oil.
Quiet Start to the Trading Day with the US on Holiday
Traders are preparing for a relatively quiet start to the trading week with US markets enjoying a long weekend for the Martin Luther King holiday. There is very little in the way of tier 1 data releases across all the trading sessions today although traders will note that the World Economic Forum kicks off in Davos and we are likely to hear unscheduled as well as scheduled updates from central bankers as the weeks progresses. In addition to this the prospect of any further escalation in the Middle East will keep investors with a close eye on newswires as we move through the trading day.
