Bonds "on fire" as flight to security grows By Reuters

By Marc Jones

LONDON (Reuters) – Investors on Monday sought out the safety of government bonds, the yen, the Swiss franc and gold, as rising trade tensions weighed on equities and equities again. pushed oil into the territory of bear markets.

After a torrid month of May that destroyed $ 3 trillion in global equities, the deterioration of trade and the general economic backdrop propelled the start of June by storming.

European equities fell again and the Swiss franc reached its highest level in two years, while Beijing sent another blow to Washington's trade bow, after the euro zone data were weak. [nS8N1Z9051], although the big bottom wave was linked.

German government bond yields – which move in the opposite direction of prices – hit record lows, and US two-year government bond yields experienced the largest decline in two days since the start of the year. beginning of October 2008, at the moment of the outbreak of the global financial crisis. [nL8N23A1P1]

"The bonds are more or less on fire and I think we'll spend the week with the dominant trade all the rest," said Societe Generale (PA 🙂 Kit Juckes, global strategist.

With German and British political concerns and concerns over Italian finances that have also resurfaced, "it's hard to believe that the yen will not be at least one of this week's winners," he said. he declares.

The Japanese currency has risen, as has Europe, the Swiss franc, which has reached its highest level for almost two years in the face of the euro. The euro has hovered around $ 1,1181 () after being stuck in one of the tightest forks in its history. [/FRX]

Non-Japan Asian stocks held up better overnight, with gains in South Korea () and India () offsetting weakness in Tokyo and elsewhere. Chinese equities () have changed little, but the yuan has been under pressure.

A private survey on the Chinese manufacturing sector [CNPMI=ECI] Published Monday suggested a slight increase in activity as export orders rebounded after a contraction. [nS7N1DB01B]

Economists have noted an increase in the number of new export orders, suggesting a possible initial shipment of shipments to the United States in order to avoid potential tariff increases. US President Donald Trump – who began a potentially confrontational visit to Britain on Monday – has threatened to release an additional $ 300 billion. Chinese products.

"Chinese companies are probably considering that the current export conditions are as stringent as China's shock in 2015," said Wang Shenshen, an economist at Tokai Tokyo Research Center.

Rising tensions, falling activity

Surveys have shown that, with the bitter weight of trade, the activity of the factories has contracted in most Asian countries and in the euro area last month. [nL4N23A13B]

The slowdown in the euro area was recorded for the fourth consecutive month, and at an accelerated pace, while falling demand in the auto sector, the Brexit and wider political uncertainty have had bad consequences.

"The sector remains in its most difficult period since 2013," said Chris Williamson, chief economist at IHS Markit.

Tensions between Sino and the United States intensified further this weekend, as the two countries clashed for reasons of trade, technology and security.

A senior Chinese official and trade negotiator said Sunday that the United States could not exert pressure to force the conclusion of a trade deal, refusing to be convinced that the leaders of the two countries would meet at the G20 summit this year. weekend.

The confrontation between the two largest global economies goes beyond trade: the tension rises before the 30th anniversary of the bloody crackdown by the Chinese army against protesters around Tiananmen Square in Beijing (NYSE :).

Chinese Defense Minister Wei Fenghe warned the United States not to interfere with security disputes over Taiwan and the South China Sea after US Defense Secretary Patrick Shanahan said said that Washington would "no longer hold" on Chinese behavior in Asia. [nL4N23908N]

"Nobody now thinks that an agreement would be possible during the G20.This will be a long battle.Investors rush to secure assets," said Fujito of Mitsubishi.

Beware of bears

The gloomy economic outlook has prompted traders to believe that the US Federal Reserve will lower interest rates as soon as possible.

The federal funds interest rate futures provide for almost entirely two rate cuts this year, one by September, with over 50% chance of a change from here. July 30th to 31st.

The yield on 10-year US Treasury bonds fell to 2.07% (), the record level last seen in September 2017.

In the commodities markets, Brent oil futures () fell 1.8% to $ 60.86 a barrel. They have fallen by almost 20% since April, a movement called "bear market" in the jargon of traders. US futures () also fell 1.3%, dropping below $ 53 a barrel for the first time since mid-February.

futures in Shanghai () fell 0.5% to their lowest level in two years, while safe haven gold climbed up to 0.5% to hit its highest level in 10 weeks, at $ 1,312.4 ounce .

The Mexican peso, hit Friday by Trump's sudden threat of tariffs, regained some stability, trading at 19.6266 US dollar after falling 2.5% on Friday.

Mexican President Andres Manuel Lopez Obrador hinted on Saturday that his country could tighten migration controls to defuse tensions with Trump, while waiting for "good results" after the talks in Washington this week. [nL2N238078]