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5th January 2020

Time for cool heads

MARKET CLOSE:
iTraxx Main

44.8bp, +1.1bp

iTraxx X-Over

209.7bp, +5bp

🇩🇪 10 Yr Bund

-0.29%, -7bp

iBoxx Corp IG

B+104.6bp, +0.3bp

iBoxx Corp HY

B+349bp, +4bp

🇺🇸 10 Yr US T-Bond

1.81%, -7bp

🇬🇧 FTSE 100

5510.33, (-5.25%)
🇩🇪 DAX

9632.52, (-3.68%)
🇺🇸 S&P 500

2541.47, (-3.37%)

We were raring to go…

We wanted to be able say that we’re just a couple of days old and believe that the markets will be champing at the bit to get going. Alas, we row back a bit.

The US drone strike in Iran has markets in retreat and on the defensive with pundits already suggesting a long old grind ahead. Event risk comes to the fore and threatens a more wary investment stance for the foreseeable future. Predicting the outcome or evolution of such an uncertain situation threatening to once again engulf the whole Middle East is so difficult, that investors are largely going to remain sidelined during the early part of this week at least. There’s little choice, really.

Predictably, oil and safe-haven assets jumped. Risk asset prices were headed lower following that positive opening session of 2020. In a sense, back to square one but feeling concerned and showing little of the early year optimism weight have had from just a week ago. Much strategising will commence, but if there is only a calibrated (limited) response immediately by Iran to the US drone hit, we expect the de-escalation to help markets to settle quickly.

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