There was a minor shakeup on markets this morning as China again made headlines by announcing that it is considering reducing or even eliminating its purchases of U.S. bonds, potentially in favour of European issues. In a context in which the U.S. economy has a growing need to finance its debt, particularly in the wake of President Donald Trump’s tax measures, such a possibility would seriously complicate the country’s treasury planning. Accordingly, the greenback is under pressure against all other currencies, the U.S. bond market is down and European stock indexes are in negative territory. In North America, stock markets are looking to open down sharply.
It remains to be seen whether or not this announcement is a response to threats by the Trump administration to impose sanctions on China due to the major trade deficit between the two countries. It is highly likely that the dialogue between the two powers will begin anew.
In the meantime, crude oil prices continue to creep upward. All of a sudden, WTI has racked up gains of more than 5% since the start of the year and is aiming for the $64 threshold. This performance appears to be related to the anticipation that we will receive confirmation this morning at 10:30 of the largest seasonal drop in Crude Oil Inventories since 1999.
Stéphane Goulet
Range of the day: 1.2400 – 1.2500