Last week we said that yields would take centre stage, and this was indeed the main driver for markets in recent sessions. The US consumer price index was 0.1% higher year-on-year than expected, but this was not enough to push yields to new highs. The sad developments in Israel and Gaza created uncertainty for risk assets as fears of further escalation increased.

The US dollar index rallied again, driven up by consumer price index data. Last week, the DXY index rose 0.5% to close at 106.672.

Both the euro and the pound were mixed, losing ground against the dollar while gaining against many other major currencies. The EURUSD closed around the 1.05 level, triggering further calls for parity.

Commodity currencies also had a mixed week, with the NOK and CAD moving sideways, while the AUD and NZD fell by around 1.5% against the dollar. In the FX market, the JPY was broadly unchanged, while the MXN and CHF posted slight gains.

Oil prices recovered much of last week’s losses following the events in Israel and Gaza. Last week, the WTI price rose by 6% to close at $87.68.

Precious metals finally had a strong week as their safe haven status came back into play. Last week, gold and silver both closed over 5% higher at $1,932 and $22.70 respectively.

Equities remain resilient no matter how you look at them. There are more and more reasons to be bearish, but stocks remain defiant. Last week, the S&P500 index gained 0.3% to close at 4318 points, while the DAX fell 0.8% to 15149 points.

Bonds saw some inflows into safe havens following the escalation between Israel and Palestine, posting a rare weekly gain. The 10-year UST yield fell 15 basis points to 4.63% and the 10-year Bund rose 1.5% to close at 129.718.

Finally, cryptocurrencies showed weakness last week and were definitely not characterised by inflows into safe havens. We remain in a relatively tight consolidation range waiting for the next breakout or breakdown. At the time of writing, Bitcoin is 4% lower at $26,800 and Ethereum is over 5% lower at $1,550.

The week ahead:

The escalation in Israel/Palestine will continue to be the focus in the coming week and we hope that the world’s superpowers will eventually help de-escalate the situation. Yields continue to be key, with the 10-year UST yield seeming to form a top for now. On the data side, important inflation data are due from Japan, the Eurozone, the UK, New Zealand and Canada.

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Coeus Capital. Coeus Capital does not assume any liability whatsoever for the content of this newsletter or make any representations or warranties as to the accuracy and completeness of any information contained in this newsletter.