Economist's Insights

Today’s Trading Activity – U.S. Stocks Joined Global Selling, Crude’s Tumble Weighed on Yields, Dollar Dropped as Euro Rallied

Nov 14, 2017

Markets succumbed to separate forces Tuesday with the Euro outperforming all major currencies following a strong German GDP report and sovereign yields falling as crude prices tumbled in early morning trade. The Euro had gained steam overnight after the German economy was said to have expanded 0.8% in 3Q. That momentum extended into the U.S. session and the Euro rose for a fifth day (the longest stretch since April 2016) to gain 1.1% (the best daily result since late June) to close at its highest level since October 25. The U.S. Treasury curve saw the biggest shifts of the major sovereigns with the 2-year yield closing up 0.6 bps at 1.69% and the 10-year dropping another 3.4 bps to 2.37%. Yields briefly popped higher after the October Producer Price Report showed slightly stronger-than-expected inflation pressures but reversed lower as a sell-off in crude and U.S. equities ensued. Despite a quick (partial) recovery for U.S. stocks (the S&P dropped 0.2% after falling as much as 0.7% earlier in the day), oil prices remained lower and a drag on sovereign yields. Crude tumbled more than 3% after the IEA released a more conservative outlook for 2018 demand. While it didn’t seem to impact the markets much, tax reform made headlines again after reports indicated that the revised Senate tax plan is expected to include a repeal of the ACA’s mandate.