The unease and trepidation felt by global markets, and a temporary appetite for gold and other safe havens, diminished at the weekend with the Iran-US conflict abating.
News analysts reported Friday that markets were showing signs of recovery as the United States and Iran backed away from conflict in the Middle East.
Europe’s STOXX index reclaimed its all-time high and Wall Street futures pointed upwards, with more confident traders moving out of gold and government bonds where they had taken shelter around the time of the conflict’s height.
Iran fired missiles in retaliation for the killing by the US of a top military official, but US President Trump appeared calm, stating that no Americans were killed.
Iranian Foreign Minister Mohammad Javad Zarif had earlier said the strikes “concluded” Tehran’s response to the killing of its general Qassem Soleimani.
As the conflict ebbed, Reuters reported that the yen, considered a safe haven during geopolitical turmoil (because of its deep liquidity and Japan’s current account surplus), continued to reverse its 2020 gains in European trading.
On January 9 it fell by 0.3 per cent at 109.4 to the dollar, its lowest in a week and a half.
Meanwhile another safe currency, the Swiss franc, also fell against both the dollar and the euro.
Asian stock markets imitated Wall Street’s genuflection, rising on resumed confidence.
News analysts report that Iran’s missile attack on US army bases in Iraq on Wednesday had boosted gold above US$1,600 an ounce and sent the yen up by almost one per cent and oil by US$3 a barrel.
However, within hours these havens lost their attraction and equities began to climb again.
Reuters reported Friday that oil is now cheaper than it was before last Friday’s killing of Iranian commander Soleimani.
Brent futures reflected $65.40 per barrel on Friday while gold X fell to $1,545 per ounce.
Analysts reported that US Treasuries, which had soared in the flight to safety, also settled back. Yields on the benchmark 10-year US Treasury note were at 1.8685 per cent, after dropping as low as 1.705 per cent.
Europe’s benchmark yields were at one-week highs too, with the benchmark German Bund yield almost 4 basis points higher at -0.22 per cent, itself near to seven-month highs.
Meanwhile, Reuters noted, the Brexit-bound sterling took a dip to $1.3028, its lowest level since Dec. 27.
The selloff in Treasury bonds began Wednesday when the Middle Eastern conflict softened and speeded up on Thursday on a strong weekly jobless report.
Markets responded positively to year end labour data which indicated 145,000 new jobs for December 2019.
Analysts noted that minimum wage increases in 21 states and 26 cities and counties that either went into effect this month or are scheduled for later this year could help to further pull up paychecks at the bottom.