Yields up with low oil and markets in election mode

Wednesday was a mixed day for European markets as investors munched on the latest uncertainty surrounding the U.K. election and a sharper than expected fall in Eurozone inflation. U.K. Prime Minister Theresa May confirmed she will not participate in the TV debate ahead of the General Election after Labour leader; initially planned to skip the debate but then changed his mind. Adding to this, the US President Donald Trump decided to withdraw his country from the Paris climate agreement. However, Trump said he would announce his decision within the next few days.

The DAX advanced 0.13% with E.ON being the best performer as its stocks increased 2.87%. The German group's shares rose after reports that the company is discussing the sale of its stake in Uniper to Fortum Oyj. In Paris, the CAC 40 fell 0.42% as Societe Generale dropped almost 5%. London's FTSE 100 edged down 0.09% pulled down by the mining sector. Anglo American decreased 2.58% while BHP Billiton and Rio Tinto followed with declines of 2.37% and 2.27%, respectively.

On Wall Street, the US markets remained mildly lower, showing a broad weakness in the banking sector, energy and metal stocks.

Government Bonds

In the U.S., government bonds were mostly lower after Dallas Federal Reserve chief Robert Kaplan said the central bank still sees three interest rate increases this year as a baseline scenario. Mr. Kaplan also mentioned the undecided, inclusion of the border adjustment tax by President Trump. This tax would favour exports over imports and thus incentivize domestic production and manufacturing. However, this would ultimately lead to higher costs for consumers.

At one point, the yield on 10-year Treasuries rose 0.52 basis points to 2.215%, while the yield on two-year bonds eased 0.19 basis points to 1.2812%. The yield on 30-year debt increased 0.54 basis points to 2.8826%.

In Europe, the yield on 10-year German Bunds edged up 0.3 basis points to 0.295%, whereas the yield on British gilts of the same maturity climbed 1.8 basis points to 1.012%.

Oil

Crude oil traded deeper in the red, sending the international benchmark Brent below the $50-mark, as concerns over rising global supply persist. Today's news that Libyan output was recovering from a technical issue at an oilfield fueled worries that Organization of Petroleum Exporting Countries' (OPEC) output cuts would not suffice to cap supply levels. Oil investors and watchers are expecting the Libyan daily output to reach 800,000 barrels. In the meantime, the US shale drilling is also anticipated to increase, driving the investment incentives in oil lower.

Disclaimer:

This article was issued by Rodrick Duca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.