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Euro zone government bond yields rose on Friday ahead of U.S. jobs data, and after reports that U.S. President Donald Trump is taking steps to resolve a trade war with China fuelled a bid for riskier assets.
Asian equities jumped to three-week highs after Bloomberg reported that Trump is seeking a trade agreement with Chinese President Xi Jinping, setting the tone for a strong European open which saw stocks there gain 1.1 percent.
"We've seen a correction of the very pessimistic mood by investors, driven by decent earnings and some good news regarding the trade spat," said Rene Albrecht, analyst at DZ Bank.
"But this looks like election tactics by Trump with the mid-terms next week. With stock markets diving he probably felt the need to counteract."
The U.S. government has agreed to let eight countries, including close allies South Korea and Japan, as well as India, keep buying Iranian oil after it reimposes sanctions on Tehran from next week, Bloomberg reported on Friday, citing a U.S. official.Iran’s biggest oil customers - all in Asia - have been seeking sanctions waivers to allow them to continue buying some of its oil.Bloomberg reported that close U.S. allies South Korea and Japan had received waivers along with India, which relies heavily on supplies from Iran. A list of all countries getting waivers was expected to be released officially on Monday, Bloomberg said.China says Xi-Trump call was quite positiveA Chinese official told Reuters that discussions with the U.S. government were ongoing and that a result was expected over the next couple of days.“We think Trump will agree to China importing some volumes, similar to the treatment that India and South Korea receive,” Clayton Allen of Height Securities said in a note on Friday.South Korea’s foreign ministry declined to comment, and Japanese officials were not immediately available for comment.Another country that has been seeking a sanctions waiver is Turkey, which takes significant volumes via pipeline from neighboring Iran.Turkey’s Energy Ministry said on Friday it had heard rumors of waivers but added it had not received written notification of any exemption on buying Iran oil after the United States reimposes sanctions on Tehran on Nov. 5.Although some waivers had been expected, crude oil prices fell, with Brent futures down by 10 cents at 0752 GMT to $72.79 per barrel, as the number of waivers granted surprised many traders.Goldman Sachs said it expects Iran’s crude oil exports to fall to 1.15 million barrels per day (bpd) by the end of the year, down from around 2.5 million bpd in mid-2018.
US grants eight countries Iran sanctions waivers
Both 10-year U.S. Treasury bond yields and 10-year German yields - key safe-haven assets - rose to their highest in over a week, up three basis points each early on Friday.,
Most other higher-grade euro zone government bond yields were 2-4 basis points higher.,.
The improved risk appetite helped fuel demand for Italy, with its bond yields falling up to five basis points.
Albrecht said the upcoming U.S. mid-term elections meant the selloff in risk assets would be limited.
China’s foreign ministry said on Friday that the previous day’s telephone call between Chinese President Xi Jinping and U.S. President Donald Trump was quite positive.The two heads of state think they should enhance trade relations, ministry spokesman Lu Kang told a daily news briefing.Trump asks officials to draft possible trade deal with China
China says Xi-Trump call was quite positive
Further direction might come from the U.S. jobs report due at 1230 GMT, with investors looking for more indications on the health of the U.S. economy and the pace of further Federal Reserve interest rate rises.
U.S. job growth is expected to have rebound in October with wages expected to have recorded their largest annual gain in 9-1/2 years, pointing to further labour market tightening that could encourage the Fed to hike again in December.
Data on Thursday showed worker productivity slowed in the third quarter, which tempered the rise in yields in late trade, according to an analysis by ING.
"There is perhaps a bit more evidence the U.S. is starting to feel the negative effects of trade uncertainty, higher interest rates and the stronger dollar," analysts at the bank wrote in a note published on Friday.
After the market close, the European Banking Authority will release the results of its latest stress tests. Analysts will be looking to see how a lengthy selloff in Italian government bonds has affected the balance sheets of the four Italian banks surveyed.
U.S. President Donald Trump announced plans Thursday to change the country's immigration policy to limit asylum seekers.In a speech at the White House, Trump said he plans to get rid of the “catch and release” policy where immigrants who are caught crossing the border are released back into the U.S. community while they await their immigration hearings.While Trump claimed the policy was created by the Democrats, it was first enforced under the George W. Bush administration."We're not releasing anymore. We're going to catch, we're not going to release. They are going to stay with us until the deportation hearing," Trump said.Trump also claimed that only three percent of immigrants who enter the country attend their immigration hearings. But according to data from the Department of Justice, around 60-75 percent of them show up.He sharply criticized current asylum policies, saying many of them are fraudulent and processing cases takes too long."The biggest loophole drawing aliens to our borders is the use of fraudulent or meritless asylum claims to gain entry into our great country," Trump said.Trump’s remarks come ahead of midterm elections as a late effort to stoke fear over a "migrant caravan" attempting to enter the U.S. and in a bid to bolster support from Republican voters.They also follow his announcement Wednesday that he may send as many as 15,000 troops -- more than the number currently in Afghanistan -- to the country's southern border in a bid to stop or detain those in the caravan.The military will be putting up "massive cities of tents" to hold any immigrants entering the country illegally, according to the president.Air Force Gen. Terrence O’Shaughnessy noted that some of the troops being sent to the border will be armed. In response to a question, Trump said that any rocks thrown by asylum-seeking migrants at the U.S. military will be "considered a firearm".The announcement is the latest move to drastically change U.S. immigration policy after the president recently announced plans to end birthright citizenship with an executive order.Birthright citizenship has its foundation in the 14th Amendment of the Constitution, ratified in 1868, and was meant to stymie efforts to deny citizenship to former slaves. Ending it would likely require a constitutional amendment, according to many legal scholars.Trump asks officials to draft possible trade deal with China
Trump announces plans to limit asylum seekers