|
 Indonesia's rupiah sank to a 16-year trough and Russia's rouble,
weighed down additionally by concern about fresh U.S. sanctions
against Moscow, hit record lows. Emerging stocks fell to nine-month
lows <.MSCIEF> and developing market dollar bond yield premiums over
U.S. Treasuries were at their highest since 2011 <11EML>.
This spike in year-end volatility, which drove the CBOE Volatility
index <.VIX> on Friday to its highest level since the global markets
storm of October, is putting high risk bets under pressure
everywhere. This stress is not only obvious in emerging markets but
also in U.S. junk bonds, where almost a fifth of outstanding bonds
are from energy-related companies.
U.S. stock index futures pointed to a recovery on Wall Street, after
posting their biggest weekly fall in 2-1/2-years last week, but
investors remained edgy before this week's U.S. Federal Reserve
meeting where it is expected to hint it is getting closer to raising
interest rates.
U.S. crude futures <CLc1> fell more than 2.5 percent at one point to
as low as $56.25 per barrel <CLc1> before returning to positive
territory. They were last up 1.0 percent at $58.40 but have fallen
more than 40 percent this year. Brent <LCOc1> fell as low as $60.28
before recovering to trade 1.5 percent up at $62.75 a barrel. [O/R]
"Whilst the commodity has rallied somewhat this morning ... oil has
found it notoriously difficult recently to hang onto any gains,"
said Spreadex financial analyst Connor Campbell. "This brief moment
of positivity is no signifier of renewed health in the black stuff."
As Brent prices edged off their lows, the pan-European FTSEurofirst
300 index <.FTEU3> rose 0.3 percent to 1,323.19 points.
In Asia, Japan's Nikkei share average <.N225> fell 1.6 percent,
drawing little momentum from Japanese Prime Minister Shinzo Abe's
big election victory on Sunday, which was a boost for his
reflationary economic policies.
FED FOCUS
The volatility in global risk assets is supporting demand for
traditional safe havens such as the yen, which rose as markets
shrugged off Abe's election victory.
The dollar briefly fell to as low as 117.78 yen <JPY=> before
recovering to 118.76 yen <JPY=>, still far from the seven-year high
of 121.86 yen set one week ago.
[to top of second column] |
The euro remained on the defensive as euro zone inflation
expectations hit a new low on Friday, raising prospects of more
aggressive European Central Bank policy easing.
The shared currency was down 0.2 percent against both the yen
<EURJPY=> and the dollar <EUR=EBS>. Improving U.S. economic data has
added to bets that the Fed is moving closer to raising interest
rates next year, accentuating the divergence in monetary policy
between the Fed and the ECB.
Many investors believe the Fed may change its promise to keep
interest rates near zero for a "considerable time" at its two-day
policy meeting starting Tuesday. [FEDWATCH]
That risk is weighing on higher-yielding assets, which had attracted
capital escaping low U.S. interest rates. Junk bonds were also
feeling the pain with the U.S. high yield bond index <.MERH0A0>
falling to 10-month lows.
"There's a focus on the Fed: the market is thinking about oil, but
the medium term will be more dependent on monetary policy and not
market volatility," said Josh O'Byrne, G10 currency strategist at
Citi in London.
"Into year end though, there is some incentive to close positions
and perhaps there is a shorter threshold for pain."
(Additional reporting by Sudip Kar-Gupta, Sujata Rao and Jamie
McGeever; editing by John Stonestreet/Ruth Pitchford)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
