Risk appetite boosted, but what's really changed?
|The post-election “risk-on” rally continues this morning with European stock indices firmer again as safe havens such as gold and silver continue to lose ground.
The feeling is that some uncertainty has been taken out of the market. That is, the danger of two Eurosceptic candidates going head to head to be president of France. Macron now looks set to win, but other than that, what’s really changed? Geopolitical concerns still rumble away, President Trump is still failing to push through healthcare or tax reforms, there are question marks over US growth even as the Fed tightens monetary policy and there’s still a faint possibility that Le Pen defeats Macron in a fortnight. On top of this there’s still the possibility of a US government shut-down later this week.
Yesterday yields on the key US 10-year Treasury soared above 2.30% after trading below 2.20% last week. They pulled back yesterday afternoon and are back below 2.30% this morning suggesting that bond investors still believe that there is enough doubt over the outlook for the US economy to warrant staying long of Treasuries.
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