• The U.S. dollar rallied to a four-month high on Monday as the 10-year Treasury yield’s climb toward the psychologically important 3 percent level spurred buying of the greenback, leaving the euro and yen lower.
The 10-year yield hit its highest in over four years at 2.998 percent, driven by worries about the growing supply of government debt and accelerating inflation as oil and commodity prices climb. But although traders got close, the 3 percent barrier continued to hold late into Monday’s session.
The strong dollar also reflected an improved outlook on trade. U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China, a move that could ease tensions between the world’s two largest economies.
Against a basket of currencies the dollar index rose 0.7 percent to 90.960 .DXY, its highest level since Jan. 18.
The euro fell by 0.7 percent to a two-month low of $1.2200 EUR=, not helped by a survey showing business activity in April stabilizing across the euro zone.
The yen slumped 1 percent to a session low of 108.73 JPY= yen per dollar, its weakest since Feb. 13.
• U.S. home sales increased for a second straight month in March amid a rebound in activity in the Northeast and Midwest regions, but a dearth of houses on the market and higher prices remain headwinds as the spring selling season kicks off.
The National Association of Realtors said on Monday that existing home sales rose 1.1 percent to a seasonally adjusted annual rate of 5.60 million units last month. The market for previously owned homes accounts for about 90 percent of U.S. home sales. Sales fell 1.2 percent year-on-year in March.
• U.S. President Donald Trump threatened to make Mexican immigration control a condition of a new NAFTA trade deal on Monday, even as ministers from Canada, the United States and Mexico readied a fresh push to finalize a revamped accord this week.
“Mexico, whose laws on immigration are very tough, must stop people from going through Mexico and into the U.S. We may make this a condition of the new NAFTA Agreement,” Trump wrote in a Twitter post. “Our Country cannot accept what is happening!”
• The Trump administration has signalled it could ease sanctions against Russian aluminium producer Rusal that have sent global metal prices skyrocketing, sparking a relief sell-off on Monday that saw aluminium fall as much as 10 per cent.
The US Treasury said if Kremlin-linked billionaire Oleg Deripaska sold his stake in the company, the world’s second-largest aluminium producer by output, it could cut or lift the sanctions. It also extended the time limit for US and non-US citizens to wind up business with the company by almost five months, to October 23.
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The announcement had an immediate impact on the London Metal Exchange, where the price of aluminium fell more than 10 per cent to $2,237 a tonne after trading as high as $2,534 in the morning. In late trading, it was down 8.5 per cent at $2,278 a tonne.
• U.S. President Donald Trump and French President Emmanuel Macron emphasized pomp and ceremony on Monday as Macron began a state visit to Washington likely to be dominated by differences with the United States over trade and the nuclear accord with Iran.
The French president said on Sunday there was no “Plan B” for keeping a lid on Tehran’s nuclear ambitions.
• Western allies stepped up pressure on U.S. President Donald Trump on Monday to keep alive an international nuclear deal with Iran, with French President Emmanuel Macron due to urge him in person not to tear up the 2015 agreement.
• The Kremlin on Monday declined to comment on media reports that Russia planned to soon supply Syria with S-300 missile systems, but said a Western missile strike on Syria had soured the atmosphere in the region.
Russia’s daily Kommersant newspaper, citing unnamed military sources, reported earlier on Monday that Russia might start supplying S-300 anti-aircraft missile systems to Syria in the near future.
• Oil prices rebounded from an early slide to finish higher and strengthen further in post-settlement trade, as investors feared U.S. sanctions could dampen Iran’s output.
Brent crude futures settled up 65 cents, or 0.9 percent, to $74.71 a barrel, after falling as low as $73.13. U.S. West Texas Intermediate crude futures rose 24 cents to $68.64 a barrel, rebounding from a session low of $67.14. The difference between the two benchmarks was at its widest since Jan. 8.
• As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits - and flooding Europe with a record amount of crude.
Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices close to four-year highs.
Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said.
U.S. oil output is expected to hit 10.7 million bpd this year, rivaling that of top producers Russia and Saudi Arabia.
Reference: Reuters, Financial Times
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