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November 13, 2017

Stocks Edge Higher, Treasurys Slide Ahead of Central Bank Speeches, Inflation Data

US financial markets held within a tight range during Monday’s trading session as investors look ahead to a fresh batch of inflation data due out on Wednesday in addition to speeches from several Fed officials scheduled throughout the week.  All three major stock indices edged 0.1% higher on the day, driven by a rise in the shares of consumer product firms, and despite a greater-than 7% decline in GE’s stock price after the company announced its plan to cut its quarterly dividend in half. 

US Treasurys experienced a mild selloff towards the end of the trading session, with yields/swap rates up 1-3 bps across the curve in a bear-flattening pattern.  The yield on the 10-year note inched higher to just above 2.40%, while the 2 year Treasury yield traded above 1.68% - its highest level in more than 9 years. 

In commodities, crude oil futures fluctuated near its recent multi-year highs after reports that OPEC demand will increase next year, helping to stabilize the market further with the existing production cut agreement remaining in place.  WTI crude is currently trading at $56.70/barrel, and Brent crude is near $63.10/barrel – levels last recorded in June 2015.     

 

 

Get Your Volatility Here

Those investors who have been lulled into complacency by the historically low levels of volatility in stock/bond markets as of late and are looking for a fresh pick-me-up need look no further than the increasingly volatile Bitcoin trade.  As has been characteristic of the cryptocurrency throughout the year, Bitcoin experienced a spike in volatility during the previous two trading sessions, initially falling 29% to $5,605 before recovering to $6,400.  The plunge came as a result of a cancelled technology upgrade, the prospects of which had pushed Bitcoin to all-time highs of $7,882 last Thursday.  Exchanges of the cryptocurrency saw record highs in shorting yesterday that managed to put a dent (for now) in Bitcoin’s 500% rise year-to-date.       

 

 

Unrest in the UK Over May

The British pound tumbled to begin the week as Prime Minister Theresa May continues to struggle with keeping her detractors at bay.  On Sunday it was reported that as many as 40 Conservative members of Parliament had agreed to sign a letter of no confidence in May, only 8 MP’s shy of the required number to officially enact a leadership challenge.  The recent turmoil surrounding Prime Minister May’s administration includes the resignation of two cabinet members, in addition to demands for the dismissal of British Foreign Minister Boris Johnson, whose public comments last week (which he has since rescinded) could lead to the extended imprisonment of a British-Iranian woman.  The disarray in May’s government comes at a critical juncture of the Brexit negotiations, especially given today’s announcement by “Brexit Secretary” David Davis that any deal agreed between the UK and EU must be approved by MPs, which reignited speculation that coming up with a deal by the exit deadline of March 2019 may not happen.

 

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