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Reuters: Global stocks bounced after recent sell-offs and core government debt prices fell on Monday as markets saw a lowered risk of direct conflict between Russia and Ukraine while Middle East tensions appeared less acute.
The MSCI World Index, which tracks stocks from developed economies, was up 0.4% at 0739 GMT - though still down 3.9% from July highs as the prevailing market mood remained a cautious one.
The pan-European FTSEurofirst 300 index followed Asia up 1%.
Both regions followed Wall Street’s surge on Friday after Russia said it had finished military exercises close to the Ukrainian border, which the United States had criticised as provocative.
The Ukraine crisis has hit European markets particularly hard with the German blue-chip DAX index down 9.5% from its June peak, luring investors looking for attractively priced entry points into European equities.
“Fears over the conflict between Ukraine and Russia have receded for now, which is helping the market recover some ground,” said Arnaud Scarpaci, fund manager at Montaigne Capital in Paris. “But this is mostly a technical bounce which should last just a few days.”
The increased appetite for risk led to a modest drop in safe-haven bonds, with German Bund futures slightly down. The dollar edged up 0.1% against a basket of six major currencies.
The cautious mood extended to the market’s assessment of events in the Middle East, with investors keeping an eye on political infighting in Iraq and talks in Cairo between Israel and the Palestinians on ending the month-old Gaza war.
“There has been a slight easing in (global) geopolitical tensions but the underlying situation ... remains fragile,” said Nick Stamenkovic, bond strategist at RIA Capital Markets.
Emerging markets also got a boost, with the MSCI Emerging Market index up 1.1%, as Russian stocks rose more than 2% while the rouble rose against the dollar.
Investors also took Turkish Prime Minister Tayyip Erdogan’s victory in the country’s first direct presidential election on Sunday as a sign of stability, at least in the short term.
U.S. crude oil and Brent crude futures were broadly flat, with the former ticking up at $97.65 per barrel and the latter ticking down at $104.93.
“It’s very early to start celebrating and you’ve still got the negative effects of the sanctions (against Russia), which are likely to filter through over the coming months,” said Michael Hewson chief market analyst at CMC Markets UK.
“But anything that ratchets down the tension is always going to be an opportunity to take profit on the shorts and maybe doing a little bit of bargain hunting.”
Gold dips on firmer equities; Middle East, Ukraine eyed
Reuters: Gold slipped further from a three-week high on Monday as investors eyed firmer equity markets and outflows from the world’s top bullion fund, but held above $1,300 an ounce on concern over the Middle East and Ukraine.
Spot gold fell 0.2% to $1,307.09 an ounce by 0652 GMT, after hitting a three-week high of $1,322.60 on Friday. US gold slipped about $3 to $1,308.50.
“The only supporting factor for gold right now is the geopolitical situation. Though we have seen some easing in tensions over the weekend, the underlying problems have still not been resolved,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
“Economic data and physical markets are not supportive of prices. Gold will range between $1,280 and $1,325 as long as geopolitical tensions remain.”
Asian stocks rose on Monday following Wall Street’s rally as Moscow said it had finished military exercises in southern Russia, which the United States had criticised.
However, tensions remained high over the weekend. Artillery shells slammed into the outskirts of the Ukrainian city of Donetsk on Sunday as government forces tightened the noose around the rebel-held redoubt and called on pro-Russian separatists to surrender.
Despite the risk-aversion sentiment, speculators cut their bullish bets on gold futures and options in the week to 5 August, according to Friday data from the Commodity Futures Trading Commission.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 1.79 tons to 795.86 tons on Friday.
Physical buying in top consumers China and India has also been sluggish, while strong economic data in the United States has stoked fears of a tightening in monetary policy.
“The potential for geopolitical tensions to ease may leave gold vulnerable to the downside as the price premium built since mid-June may fade,” HSBC analysts said in a note.
