Investors traded cautiously, awaiting more clues concerning monetary policy. Safe-haven assets outperformed others, with sovereign bonds rallying.

Sovereign bonds climbed with safe debt trimming yesterday’s fall. U.S. President Trump added more pressure on the Fed to cut rates by at least 100 bps, ahead of the Jackson Hole gathering on Friday, while political uncertainties in the Eurozone supported the rallying of the 10Y German bund. With regard to peripheral bonds, Italy’s bonds recovered from early losses after the resignation of its PM Conte.

Italy’s risk premium narrowed as an alternative coalition is still an option to avoid a snap elections.

Safe-haven currencies (JPY and CHF) outperformed others across the G10 against a backdrop of uncertainty. The euro strengthened, while the DXY index fell from levels close to its 2019 record. The pound rebounded from early losses after German Chancellor Merkel said that practical Brexit solutions will be considered despite the EU’s rejection of Boris Johnson’s demand to eliminate the Irish backstop from any deal. In EM, Latam currencies inched up across the board, whereas the TRY led the losses. In commodities, gold prices edged up, while oil prices erased yesterday’s gains.

Global stocks inched down with the IBEX leading the losses in Europe.

 

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