Daily Agenda: Risk-Averse Investors Drive Up Gold

Yen hits 18-month high, gold and Treasuries rise; Halliburton scraps Baker Hughes merger; Puerto Rico’s Development Bank to default; Trump leads in Indiana.


Akos Stiller

As a new week begins, markets recalibrated to new macro forces, with the yen rallying to its highest level in 18 months and futures for both gold, which hits its highest price in more than a year and Treasuries rising. This “risk-off” pause came as investors pondered how much stimulus in China and negative interest-rate experiments in Japan and Europe can achieve in the long term. A bulletin from the European Central Bank this morning highlighted the flow of capital that included a retreat from local bonds by European investors, a potential sign that more aggressive central bank actions are being priced in.

Halliburton scraps Baker Hughes deal. Today Houston-based oil-field services firm Halliburton announced that it had backed out of its proposed merger with crosstown rival Baker Hughes after European and American antitrust hurdles proved too onerous; the U.S. Justice Department sued Halliburton on April 6. Originally valued at almost $28 billion, the cancelled deal may now produce more than $3 billion in breakup fees to Baker Hughes.

Another Puerto Rico default looms. On Sunday Puerto Rico Governor Alejandro Garcia Padilla announced that the territory will default on a bond payment of more than $400 million issued by the Government Development Bank of Puerto Rico. The bank is currently operating under an emergency grace period and technically has until the end of May to make payment, but the the Puerto Rican government has acknowledged that that will be impossible. Initial negotiations with creditors suggested that the bank will ultimately swap current obligations for fresh ones at less than 60 cents on the dollar.

Lackluster industrial data from Europe. Final Markit manufacturing purchasing-manager index levels released today for the primary Eurozone economies were mixed, with aggregate levels for the region slightly higher than initially reported. Notably, the France index contracted at a reading of 48 versus a prior 49.6 and an initial 48.3.

AIG sells stake in Chinese insurer. New York-based global insurer American International Group raised over $1.2 billion in capital through the sale of a portion of its holding in Chinese insurer PICC Property and Casualty in a block trade reported on Sunday. This brings total realized gains for the company’s PICC share sales to $2.6 billion.

Trump holds commanding lead in Indiana. A survey conducted jointly by Marist College with NBC News and The Wall Street Journal found real estate tycoon Donald Trump ahead of Texas Senator Ted Cruz by 15 percent in Indiana’s pivotal Republican presidential primary. A victory in the state on Tuesday would make the chance of Cruz and Ohio Governor John Kasich blocking Trump’s nomination significantly lower.