Why Cracks In War Trade Are Emerging
The risk-aversion trade
started to show some cracks today,
as equities and the dollar surged — while
Treasuries, metals, and energy futures were punished. It all started last night in the currency markets
when rumors about a possible surrender by Iraqi generals triggered a short
squeeze. The other global markets quickly followed suit, as equity markets
rallied all over the world, and bond markets were pounded.
Equities
The equity markets surged today, led by the tech
sector–semiconductors were up 7.8% — followed by consumer cyclicals, and
chemicals. The Nasdaq
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futures
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finished up 3.54%35 to finish at 7829.
Fixed Income
The treasuries, which have been the primary
beneficiaries of investor risk aversion, all finished substantially lower today.
The five-year note was down by 0-265 to close at 113-110
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year contract
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Metals
Copper futures were still depressed by
yesterday’s oversupply news and did not participate with the equity move; copper
declined by.50 to finish at 75.20
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Energy
April crude oil dropped by 1.82 to close at
36.01
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natural gas market were partly influenced by better-than-expected supplies
released by the Department of Energy. The April contract
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finished at 5.360, down by .505 .
Currencies
The surge in the US dollar was the catalyst for
the move in all of the other markets today, and the USD index
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up 1.43 to finish at 100.07. The US dollar had its biggest move against the euro
and Swiss franc, finishing up 1.87% and 1.7% respectively. The US dollar also
moved against the Japanese yen, finishing up about 1%.