Oil slump triggers rally
in safe-haven bonds, yen and gold
Send a link to a friend
[May 05, 2017]
By Marc Jones
(Reuters) - A slump in oil prices to the lowest in almost six months
rattled commodity markets on Friday and triggered a rally in safe-haven
bonds, the yen and gold.
Stocks also flinched both in Asia and Europe, catching investors that
had been expecting to spend the day mostly looking ahead to U.S. jobs
data and Sunday's French elections, on the back foot.
They had to duck for cover overnight as both Brent and U.S. crude prices
fell more than 3 percent to below $47 a barrel at one stage on mounting
concerns about global oversupply.
Things only began to stabilize when Saudi Arabia's OPEC chief hit the
wires in European hours, saying there was a growing consensus among oil
pumping countries that they needed to continue to "rebalance" the
"The whole commodity complex has been affected by this and it could have
some pretty big implications if it continues for much longer," said Saxo
bank's head of FX strategy John Hardy.
"If you look at global risk appetite, equities have been pretty quiet
and that feeds into FX as well if carries on and there is a risk
Oil wasn't the only commodity that suffered. Chinese iron ore futures
fell almost 7 percent in Shanghai after tumbling 8 percent on Thursday.
The Canadian dollar, the Australian dollar and Russia's rouble - some of
the world's most commodity- sensitive currencies - were all sent
spinning, falling respectively to 14-month, four-month and seven-week
They all fought back, though, after the Saudi OPEC governor's comments
that: "A six-month extension (to production cuts) may be needed to
rebalance the market, but the length of the extension is not firm yet."
The euro <EUR=> meanwhile touched six-months highs of almost $1.10 ahead
of France's weekend election, in which polls now expect centrist
Emmanuel Macron to convincingly beat right-wing and anti-euro rival
Marine Le Pen.
[to top of second column]
Investors look at an electronic board showing stock information at a
brokerage house in Shanghai, China, March 7, 2016. REUTERS/Aly
gap between French and German 10-year government borrowing costs also hit a
six-month low and despite the dip on the day, European shares were heading for a
healthy 1.2 percent rise for the week.
"I think now this election is no longer an issue and the market is already
starting to focus on new issues: inflation, the (euro zone) economy, and the
U.S. data," said DZ Bank strategist Daniel Lenz.
He was referring to U.S. jobs numbers due out later which are expected to show
185,000 jobs were created in April following March's underwhelming 98,000
The dollar and U.S. government bond yields had both been nudged lower by the
commodity market worries. It is set to be the fourth weekly fall on the trot for
the greenback which is now at its lowest since November.
The yen and gold rose in tandem as investors took refuge in safe havens, though
the latter remained on track for its biggest weekly decline in nearly six months
on bets that U.S. interest rates will rise again in the coming months.
"I think the payrolls will be under consensus," said fund manager Hermes chief
economist Neil Williams.
"It fits with my view that the U.S. is going to peak out at a far lower interest
rate than markets expect. The Fed's dot plots says 3 percent, but I'm going
closer to 1.5 percent."
(Addition Reporting by Abhinav Ramnarayan in London; Editing by Hugh Lawson)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.