* Safety rush turns to relief rally as Mideast tension eases
* Europe and Australia return to record highs, Nikkei adds
2.3%
* Yen slides to two-week low
* First two-day fall for gold since November
* Support for oil hints at caution remaining
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Jan 9 (Reuters) - World markets looked to have
overcome their new year wobbles on Thursday, as the United
States and Iran backed away from conflict in the Middle East.
U.S. President Donald Trump's suggestion that Iran was
"standing down" after it fired missiles at U.S. forces in Iraq
had helped give Asia its best day in weeks and saw
Europe's STOXX index .STOXX reclaim its all-time high record.
.EU .T
Wall Street futures were also pointing upwards .N as more
confident traders edged out of the yen JPY= , gold XAU= and
government bonds where they had taken shelter. /GOL GVD/EUR
Iran fired missiles at military bases housing U.S. troops in
Iraq on Wednesday in retaliation for a U.S. drone strike that
killed a top Iranian general. But in an address on Wednesday,
Trump said no Americans were hurt and made no direct threats of
a military response, although he did say there would be more,
albeit unspecified, economic sanctions.
Iranian Foreign Minister Mohammad Javad Zarif had earlier
said the strikes "concluded" Tehran's response to the killing of
its general, Qassem Soleimani. "The obvious first conclusion to make is that we see the
potential for further yen depreciation going forward," said
MUFG's EMEA head of research, Derek Halpenny, adding that the
likelihood of a major conflict was now low.
The yen, considered a safe haven during geopolitical turmoil
because of its deep liquidity and Japan's current account
surplus, continued to reverse its 2020 gains in European
trading. It was last down 0.3% at 109.4 to the dollar, its
lowest in a week and a half JPY= /FRX .
Another safe currency, the Swiss franc, also fell against
both the dollar and the euro. EURCHF= .
In Asia, stock markets had taken their cue from Wall
Street's overnight bounce. MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS rose 1.3%, its biggest gain
in almost a month.
Hong Kong's Hang Seng Index .HSI and Shanghai blue chips
.CSI300 each added more than 1.2%. Japanese stocks .N225
gained 2.3% to their highest for the year. .T
Australian stocks .AXJO rose 0.8% to a record closing
high. Futures markets pointed to gains continuing in the United
States, with S&P 500 futures ESc1 up 0.3% and Dow futures 0.4%
higher FDXc1 .
"I think today is a bit of a relief rally," said Shane
Oliver, Chief Economist at AMP Capital in Sydney. "Yesterday,
investors were fearing the worst... The news overnight has been
more along the lines that Iran pulled its punches and Trump is
toning things down."
ALL IS WELL
Iran's missile attack on U.S. army bases in Iraq on
Wednesday had sent gold blasting above $1,600 an ounce and
boosted the yen by almost 1% and oil by $3 a barrel.
But it took just hours for that safe-haven dash to fade and
for world equities to resume their climb. Oil is now cheaper than it was before Friday's killing of
Iranian commander Soleimani. O/R Brent futures LCOc1
steadied at $65.40 per barrel, about where they began the year.
Gold XAU= fell to $1,545 per ounce, giving back
Wednesday's gains but remaining more expensive than it was
before Soleimani's death, suggesting investors' fears have not
evaporated completely. GOL/
U.S. Treasuries, which had soared in the flight to safety,
also settled back though. Yields on the benchmark 10-year U.S.
Treasury note US10YT=RR were at 1.8685%, after dropping as low
as 1.705%.
Europe's benchmark yields were at one-week highs too, with
the benchmark German Bund yield almost 4 basis points higher at
-0.22% which was not far off seven-month highs. DE10YT=RR
GVD/EUR
Brexit-bound sterling took a dip to $1.3028, its lowest
level since Dec. 27, as Bank of England Governor Mark Carney
said it could provide a "relatively prompt response" if the UK
economy looked like it was facing prolonged
weakness. The better risk appetite though was also evident in emerging
markets. China's trade-exposed yuan CNY= reached a five-month
high of 6.9281 per dollar and South Africa's rand ZAR= and
Turkey's lira TRY= that had both been buffeted this week, saw
rebounds. EMRG/FRX
"All is well - so says Trump! That is the mood today," said
Bank of Singapore currency strategist Moh Siong Sim.
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