With volume starting to fade ahead of Friday’s holiday, and geopolitical concerns growing as a US aircraft carrier approaches North Korean, S&P futures pointed to a slightly lower open, in line with stock markets in Europe and Asia. Safe havens such as gold and treasuries strengthened along with Japanese yen, which erased all of yesterday’s losses and neared its 110 support on investor caution about global security risks and the future of U.S. interest rates after Yellen’s Monday speech failed to provide clarity.

“I think we have a healthy economy now,” Yellen said at an event at the University of Michigan’s Ford School of Public Policy in Ann Arbor and confirmed that the “appropriate stance of policy is now closer to, let me call it neutral” and that “we want to be ahead of the curve and not behind it”.

“Whereas before we had our foot pressed down on the gas pedal trying to give the economy all the oomph we possibly could, now allowing the economy to kind of coast and remain on an even keel — to give it some gas but not so much that we are pressing down hard on the accelerator — that’s a better stance of monetary policy,” she said.

Yellen also suggested that inflation is still below 2% in her estimation. Yellen also voiced some concern about the Fed’s independence being under threat, referring specifically to two bills put forth in Congress and legislation that would require the Fed to follow a simple mathematical rule in setting interest rates and any deviation from it would result in calling in the General Accounting Office to conduct audits.

Crude oil ended this year’s best run, and was modestly lower in early trading.

Haven assets were bid after Sean Spicer issued a warning to Syria not to use barrell bombs while tensions over North Korea rumbled on, while in Europe the recent surge in far-left candidate Melenchon has changed the French presidential election calculus materially in recent days, sending the spread between French and German 10Y blowing out again, helped by yesterday’s Goldman downgrade of French OATs.

Bond yields fell after Federal Reserve Chair Janet Yellen confirmed the central bank has shifted gears from post-crisis healing to sustaining economic gains according to Bloomberg. Oil dropped after five days of gains although that may reverse should API and EIA data due over the next two days show a decline in stockpiles from record highs. Gold hit its highest since November.

“It’s a relatively modest reaction but there is a lot of geopolitical risk in global markets at the moment,” said TD Securities European head of currency strategy Ned Rumpeltin.

A quick recap of the latest geopolitical news:

• China has deployed 150K troops in order to deal with the possible North Korean refugees over fears that Trump may strike Kim Jong-un following the missile attack on Syria.
• North Korea vowed to take toughest counteraction against US after the US deployed the USS Carl Vinson to the Korean peninsula.
• China and South Korea have agreed to place “strong” new sanctions on North Korea if it conducts further nuclear or long-range missile tests, according to a South Korean official.
• U.S. Secretary of State Rex Tillerson will visit Moscow this week in an effort to persuade Russia that its alliance with Assad is no longer in its strategic interest.
• The G-7 foreign ministers hold a news conference after a two-day meeting in Lucca, Italy.

As Richard Breslow commented earlier, confused traders not only have to cope with monetary tightening in the world’s biggest economy and the prospect of an unwinding central bank balance sheet, they’re also weighing President Donald Trump’s unpredictable foreign policy.

“Flight to safety drives the global markets, as geopolitical concerns occupy the global headlines with North Korea’s missile tests and growing threat against the U.S., the U.S.’s strike on Syria and Jean-Luc Mélenchon gaining support in the French election,” Ipek Ozkardeskaya, a market analyst at London Capital Group Ltd., wrote in a note.

Looking at global markets, the MSCI All-Country World Index was little changed. Volumes in markets are down in a week that’s shortened in many countries by Easter holidays. Chinese equities traded in Hong Kong fell to a one-month low while Japan’s Topix slipped as the yen gained. Shares in Seoul extended the longest losing streak since June as tensions over both Syria and North Korea remain in focus. S&P 500 futures were unchanged at 6:30am ET. The index climbed less than 0.1% on Monday, even as the VIX, rose to the highest level this year.

The Stoxx Europe 600 Index dropped less than 0.1 percent, after a four-day rally to the highest since December 2015. European stocks were also subdued and looked to be heading for a second day in the red as an early attempt at a move higher quickly fizzled. Tech stocks were the biggest sectoral losers as broker downgrades sent chipmaker Dialog Semiconductor and AMS (AMS.S) tumbling 18% and 7.5%. Banking stocks also dropped with Spain’s Banco Popular (POP.MC) down over 5 percent after the bank said that it was considering another capital hike and would consider a merger.

German Bunds yields dipped below 0.20% for the first time in more than five weeks while French yields rose to a one-week high of 0.96% leaving the spread between to two at its biggest in six weeks.

“After Britain’s Brexit referendum and the U.S. presidential election surprised markets in 2016, could this event do the same?,” Mark Burgess, global head of equities at Columbia Threadneedle in London, wrote in a note.

Gold was the main beneficiary of the cautious mood, with the precious metal up at its highest since November at $1,256 an ounce and advancing for the sixth day in the last eight. Oil retreated from five-week highs hit earlier in the session meanwhile, as concerns about rising U.S. shale production offset a shutdown at Libya’s largest oilfield over the weekend and the U.S. strikes against Syria that had supported prices. Brent fell 10 cents to $55.89, breaking a six-session winning streak, while U.S. crude pulled back 14 cents to $52.95 a barrel, after rising for the previous five sessions.

Market Snapshot

• S&P 500 futures down 0.1% to 2,349.70
• STOXX Europe 600 down 0.06% to 381.03
• MXAP down 0.09% to 146.47
• MXAPJ down 0.2% to 478.02
• Nikkei down 0.3% to 18,747.87
• Topix down 0.3% to 1,495.10
• Hang Seng Index down 0.7% to 24,088.46
• Shanghai Composite up 0.6% to 3,288.97
• Sensex up 0.6% to 29,752.46
• Australia S&P/ASX 200 up 0.3% to 5,929.27
• Kospi down 0.4% to 2,123.85
• German 10Y yield unchanged at 0.208%
• Euro up 0.05% to 1.0601 per US$
• Italian 10Y yield rose 2.1 bps to 1.947%
• Spanish 10Y yield fell 0.7 bps to 1.606%
• Brent Futures down 0.3% to $55.83/bbl
• Gold spot up 0.2% to $1,257.23
• U.S. Dollar Index down 0.1% to 100.92

Top Overnight News from Bloomberg

• U.S., Allies Show Unity on Syria Before Tillerson Moscow Visit
• Toshiba Warns of Its Ability to Continue as Going Concern
• Dialog Semiconductor Shares Tumble After Analyst’s Apple Warning
• Le Pen Faces Trump’s KKK Quandary With Extremist Supporters
• MTS Probe Finds Misconduct in China Unit; 2017 EPS View Trails
• Circassia Says FTC Approves AstraZeneca Deal
• Bristol’s Cancer Drug Opdivo Is Too Expensive: U.K.’s NICE
• Seadrill’s North Atlantic Gets Conoco Rig Contracts for $1.4b
• BHP Billiton Said to Work With Goldman Sachs on Elliott Defense
• Billionaire Eurnekian Said to Hire Lazard to Help Itau Sell TGN
• PPG Offer for Akzo Nobel Is ‘Unacceptable’, FD Cites Akzo CEO
• LG Display Says No Details Decided on Google OLED Investment
• Ford to Add Five All-New SUVs to North American Lineup by 2020
• Uber Must Give Waymo Documents Levandowski Wants Sealed: Judge

Asia equity markets traded with a muted tone as geopolitical news continued to be in focus following reports that the US hold open the possibility for future action in Syria and with North Korea vowing to take the toughest counteraction against the US following its carrier deployment to the Korean peninsula, while China had amassed 150K troops on the North Korean border which was later reported to be to a deal with possible North Korean refugees. Fears were evident as safe-haven flow was apparent with the stronger JPY weighing on the Nikkei 225 (-0.3%), while sentiment in China was mixed with the Shanghai Comp. (+0.6%) higher and Hang Seng (-0.9%) negative after the PBoC continued to refrain from liquidity injections. ASX 200 (+0.3%) took the spotlight in the day’s session, as the index extended on gains above 5,900 to approach close to a 9-year high with the materials driven index buoyed by Rio Tinto, which is up over 2% on the day, while gains across the energy sector also underpinned the index. Finally, JGBs was mildly supported as the flight to safety has been the theme, with the Japanese lOy yield pressured as a result to below 0.05% and print its lowest since January 2017. PBoC refrained from conducting open market operations today for a daily net drain of CNY 20bIn.

Top Asian News

• China March Retail Auto Sales Rise 1.6% on Year, PCA Says
• China H Shares Slide to One-Month Low Amid Regulation Worries
• Fed Rate Hikes Raise Risks for Asian Nations Swimming in Debt
• China Seen Allowing Bigger Yuan Declines as Trade Tensions Ease
• Top Korea Presidential Candidate Open to Talks With Kim Jong Un
• Singapore Revokes One Asia Investment’s Capital Markets Permit
• World Bank Says Philippines to Remain Top Performer in East Asia

European indices trade broadly lower this morning (Eurostoxx 50 down as much as -0.4%) as risk off sentiment filters through to Europe from Asian trade amid increased global tension. As well as the global tension, markets are also being weighed on due to concerns over the upcoming earnings season, light volumes ahead of Easter and a touted delay to the delivery of any tax reform in the US. There has also been volatility on a stock specific basis with German listed Dialog shedding over 20% of their share price after a note from Bankhaus Lampe suggested Apple may drop the chip maker and instead produce their own; elsewhere luxury name LVMH are among the best performers today after a stellar revenue update. The risk off sentiment has also filtered through to fixed income markets, where Bund yields reside at their lowest levels in five weeks, while concerns over the rise of Melenchon potentially blowing the election race wide open has seen yields rise.

Top European News

• U.K. Inflation Pickup Takes Easter Break as Rate Stays at 2.3%
• BT’s EE to Recruit 800 Customer-Service Staff in U.K., Ireland
• Putin Said to Plan to Meet Tillerson Tomorrow, RBC Reports
• EU Banks Profitability in U.S. Is Higher Than Disclosed: HSBC
• Romanian Opposition May Pick New Central Bank Deputy Governor

In currencies, the yen gained 0.2 percent to 110.67 per dollar at 9:53 a.m. in London, strengthening for a second day. The Bloomberg Dollar Spot Index edged lower by 0.1 percent, while the euro pared losses to trade little changed. The British pound added less than 0.1 percent to $1.2422; data showed U.K. inflation’s upward trajectory paused in March. The main movers this morning have been the JPY and later in Europe GBP. The former has gained on the rise in tensions between the US and North Korea, as the later has responded to the incursion into the Korean peninsula. USD/JPY has tested down into the mid 110.00’s again, and again found support, but subsequent upside traction will be limited under the circumstances, as we get to see further pressure through the cross rates. EUR/JPY has been an obvious draw with the French elections ahead keeping the single unit well capped in the interim. The lead spot rate continues to run into sellers above 1.0600, while cross rate supply saw the 117.00 handle briefly relinquished. Earlier this morning we saw weakness in the EU industrial production numbers, but the ZEW sentiment surveys for both Germany and the EU as a whole show improvement. EUR/GBP pressure has also been apparent in the early exchanges, but demand ahead of 0.8500 also noteworthy. Ahead of the EU numbers, we saw headline CPI in the UK rising a little more than the consensus figure, but after a kneejerk move higher in GBP, strength sellers noting higher input prices took advantage. Cable is back around pre announcement levels, and remains on the heavy side, though we can see a period of consolidation ahead as longer term demand awaits lower down.

In commodities, West Texas Intermediate oil fell 0.3 percent to $52.91 after jumping 1.6 percent on Monday. Gold rose for a third day, adding 0.2 percent to $1,257.03 an ounce. Iron ore futures climbed as much as 1.4 percent in China after dropping 7.1 percent in the previous two sessions, but pared most gains. Zinc extended its decline, dropping 1.3 percent amid signs that output is increasing. The London Metal Exchange index of six metals contracts closed Monday at the lowest in a month. Oil prices are coming off better levels in recent trade, but despite the fact that events in Syria have been the primary driver of recent gains, WTI has made good in-roads back into the USD 50-55 range. Brent has tipped USD56.00 also, but from here, we are back to watching the inventory — API tonight. Precious metals also stay bid from the risk perspective, but with the USD tailing off again today, Gold has retested USD1260. Silver still struggling ahead of USD18.00 though. In base metals, Zinc has underperformed notably over the last 24 hours. Supply issues/stockpiles continue to determine price at the present time, with ‘steady’ demand-side factors hit on recent bearish forecasts by key analysts. Copper gravitating circa USD2.60 for now.

Looking at the day ahead, we get the February industrial production report for the Euro area which disappointed, rising only 1.2% vs Exp. 2.0%, and the  April ZEW survey in Germany which beat at 19.5, vs Exp. 14.0 (up from 12.8). Over in the US this afternoon the data includes February JOLTS job openings and the March NFIB small business optimism reading. Away from the data the Fed’s Kashkari is due to speak at 6.45pm BST while the ECB’s Visco is also scheduled to speak this afternoon.

US Event Calendar

• 6am: NFIB Small Business Optimism, est. 104.7, prior 105.3
• 10am: JOLTS Job Openings, est. 5,650, prior 5,626
• 1:45pm: Fed’s Kashkari Participates in Q&A in Minneapolis

DB’s Jim Reid concludes the overnight wrap

It wasn’t a particularly exciting day in markets yesterday at the start of two holiday shortened weeks. The S&P 500 rose a modest +0.07%, meaning the index has now closed up or down by less than 0.10% three times in the last week. In Europe the Stoxx 600 recovered from a mid-session wobble to finish unchanged by the closing bell. Sovereign bond markets were stronger at the margin although again moves were very modest. 10y Bund yields finished 2.1bps lower at 0.202% and are starting to approach the February lows on the current on the run contract again (when they touched 0.179%). Similar maturity Treasury yields were also 1.6bps lower at 2.367%. Meanwhile in commodities WTI Oil (+1.61%) continues to march higher and closed above $53/bbl for the first time since March 7th with yesterday’s move in part supported by the news of a production outage at Libya’s largest oil field.

A little less boring was the fact that we did see equity vol climb a bit yesterday. The VIX closed above 14 (+9.17%) for the first time since December 2016 while the VSTOXX in Europe climbed over 13% to close at 22.09 and the highest level since December 2nd. Geopolitical concerns have clearly been on the rise over the last week or so with Syria and North Korea never far from the front pages while it’s worth noting that we are all of a sudden now just 12 days away from the first round presidential election in France. Yesterday we noted the climb in the polls for Melenchon over the last few weeks and an Ifop-Fiducial poll released yesterday confirmed the trend. The poll showed both Le Pen (24%) and Macron (23%) as holding on to first and second place still, with Fillon (18.5%) and Melenchon (18%) barely separated in third and fourth place. That percentage for far-left candidate Melenchon is up from 11.5% using the same pollster in a poll run back on 18-21st March. In that time support for Hamon has fallen 3.5% but it’s worth noting that the poll back in March also had support for Le Pen and Macron at 26% and 25.5% respectively. So the gap between the top 4 has certainly shrunk in recent weeks. Our economists in France noted yesterday that in 2012 Melenchon also witnessed a similar surge in the polls at the same point in the campaign. Ultimately that surge in support did not materialise in the first round vote and he was not close to qualifying for the second round. They do however highlight that this time may be different because Melenchon appears closer to the top two candidates in first round polls. But, this also means that his radical program might ultimately push moderate voters back towards mainstream candidates. While the most likely outcome remains a second round between Macron and Le Pen, the race to qualify for the second round has tightened in the last week, so it’s one to keep an eye on over the next couple of weeks.

This morning in Asia bourses have kicked off Tuesday largely on the back foot. A stronger Yen (+0.23%) is weighing on the Nikkei (-0.71%) while the Hang Seng (-0.80%) and Shanghai Comp (-0.46%) are also weaker. In Korea both the Kospi (-0.59%) and Korean Won (-0.52%) have extended losses with the North Korea situation still a focus. US equity index futures are also a bit weaker overnight while Treasuries and bond yields in Asia are generally lower.

Moving on. Following the close yesterday Fed Chair Yellen spoke at an event in Michigan. Yellen confirmed that the “appropriate stance of policy is now closer to, let me call it neutral” and that “we want to be ahead of the curve and not behind it”. Yellen also suggested that inflation is still below 2% in her estimation. Perhaps more interestingly, Yellen did voice some concern about the Fed’s independence being under threat, referring specifically to two bills put forth in Congress and legislation that would require the Fed to follow a simple mathematical rule in setting interest rates and any deviation from it would result in calling in the General Accounting Office to conduct audits.

Elsewhere, and before we look at today’s calendar, quickly wrapping up yesterday’s dataflow. In Europe the most notable release was the Sentix investor confidence for April which rose 3.2pts during the month to 23.9 (vs. 21.0 expected) and to the highest since August 2007. In France the Bank of France business sentiment reading was down 1pt in March to 103. Over in the US the lone release was the Fed’s labour market conditions index which rose a fairly modest 0.4pts in March, but in doing so confirmed a 10th consecutive monthly rise for the index.

Looking at the day ahead, this morning in Europe the early focus will be on the UK where we get the CPI/RPI/PPI data dump for March. The consensus is for a +0.3% mom increase in headline consumer  prices while PPI output prices are expected to have risen a more modest +0.1% mom. Following that we then get the February industrial production report for the Euro area (+0.1% mom expected) and the  April ZEW survey in Germany. Over in the US this afternoon the data includes February JOLTS job openings and the March NFIB small business optimism reading. Away from the data the Fed’s Kashkari is due to speak at 6.45pm BST while the ECB’s Visco is also scheduled to speak this afternoon.

Well done for getting to this point and staying awake.

Last night we noted that, rather than help police arresting a suspect in Friday’s horrendous terrorist attack in Stockholm, migrant residents of the suburb of Rinkeby apparently decided instead to pelt the arresting officers with rocks.  Of course, the incident was just one more example of the unintended consequences of Sweden’s ‘open border’ policies and a direct contradiction of arguments from senior Swedish officials that would suggest that the influx of migrants hasn’t made towns like Rinkeby any less safe.

That said, less than 24 hours later, the Swedish postal service has been forced to suspend service to Rinkeby after declaring the area “unsafe” for workers.  So if the no-go zones in Sweden are simply ‘fake news’, as the mainstream media would suggest, perhaps they should give the ‘all clear’ to Rinkeby’s postal workers who are refusing to even go outside.

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Paul Joseph Watson

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PostNord to stop delivery of mail in Swedish migrant suburb of Rinkeby because it’s “not safe”.

Remind me again how safe Rinkeby is?

Here is more on the situation from MITTI:

The reason is that it is not considered safe for postal staff to deliver the mail at some locations in the area.

 

It’s been messy in the area and therefore a protective stop to ensure the safety of our staff, says Maria Ibsen, press officer at PostNord.

 

She says that they currently do not know how long the protective stop will continue. But the dialogue with several parties and hope to be able to solve.

 

Björn Schenholm, property manager at Einar Mattsson, who manage the properties in Hjulsta, estimates that about 120 households affected by the stoppage.

Of course, we don’t suspect you’ll read about this service interruption from any MSM outlets as they’re too busy fulfilling their obligations to suppress ‘inconvenient’ facts that may hinder their pro-globalist agendas.

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Not a single mainstream media reported the death of Ebba Åkerlund, 11 years old, killed in the Stockholm terror attack. CC @IvankaTrump

That said, Swedish Prime Minister Stefan Lofven did tell a Swedish news agency that he was “frustrated” by the news that last week’s terrorist attack was carried out by a migrant who wasn’t even supposed to be in the country.  It’s a small admission but the first step is admitting you have a problem.