Doug Noland: Risk Off Making Some Headway

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
Global ‘Risk Off’ has been making some headway. This week saw ten-year Treasury yields drop 15 bps to 2.23%, the low since the week following the election. German bund yields declined another four bps to a 2017 low 19 bps. The Crowded Trade hedging against higher rates is blowing apart. The Crowded yen short has similarly been blown to pieces, with the Japanese currency surging an additional 2.3% this week (increasing 2017 gains to an impressive 7.7%). Japan’s Nikkei equities index dropped 1.8% this week, with y-t-d losses rising to 4.1%. Meanwhile, this week Gold surged 2.5%, Silver jumped 2.9% and Platinum gained 1.9%. In contrast to the safe haven precious metals, Copper dropped 2.8%, Aluminum fell 2.7% and nickel sank 4.2%.
European periphery spreads (to bunds) widened meaningfully. Italian spreads widened 14 to 213 bps, the widest since early-2014. Spanish spreads widened 13 to an eight-month high 152 bps. Portuguese spreads widened six bps and French spreads seven. Italy’s stocks fell 2.6%, with Italian banks down 5.9%. Spanish stocks lost 1.9%. European bank stocks dropped 2.6% this week.
A little air began to leak from the EM Bubble. Russian stocks were hammered 5.9% to an eight-month low, increasing 2017 losses to 14.2%. Brazilian stocks lost 2.5%. Chinese equities suffered moderate declines, while appearing increasingly vulnerable. For the most part, however, EM held its own. The weak dollar helped. EM equites (EEM) declined only 0.6% for the week, while EM bonds (EMB) gained 0.4%.

This post was published at Wall Street Examiner on April 15, 2017.