Gold and oil surge on Ukraine war fears as poor data pummels the euro By Reuters

By Naomi Rovnick and Tom Westbrook

LONDON/SINGAPORE (Reuters) -Gold, oil, and haven assets from the Swiss franc to German government debt headed for strong weekly gains on Friday after the Russia-Ukraine conflict escalated, while the dollar marched higher and poor economic data heaped pressure on the euro.

Gold was up 1.1% at $2,688 an ounce on Friday and 5.4% higher for the week, futures held at $74.29 a barrel after a 4.5% weekly gain and the index tracking the U.S. dollar against rivals surged to a two-year high.

The moves came after the U.S. and UK permitted Kyiv to use their weapons to strike Russian territory and Moscow responded on Thursday by firing what Washington described as a newly developed hypersonic ballistic missile into Dnipro in Ukraine.

“Those weapons typically carry nuclear warheads,” said analysts at ANZ Bank of Russia’s new missiles.

“The exchange indicates the war has entered a new phase.”

Traders were also cutting their U.S. rate cut bets on prospects of President-elect Donald Trump’s proposed import taxes refuelling domestic inflation.

The euro tumbled to its lowest since December 2022, last at $1.0432 and down 0.5% on the day, after surveys showed a surprisingly sharp euro zone business activity downturn and European gas contracts touched a year high.

Futures tracking Wall Street’s edged lower, with the benchmark equity gauge still set for a weekly rise, buoyed by hopes that Trump’s tax cutting and deregulation agenda will boost U.S. growth.

Europe’s share index switched between gains and losses on Friday, teetering towards its sixth straight weekly loss as traders balanced negative economic news with prospects of further European Central Bank rate cuts.

Money markets placed 50% odds on a 50 basis point (bp) rate cut at the ECB’s December meeting, up from 20% before Friday’s disappointing purchasing manager indexes, and implied the euro zone deposit rate would drop to 1.8% by July. The rate is currently 3.25%.

With additional pressures on Europe from Trump’s proposed trade tariffs, Germany’s government collapse and French political infighting over the nation’s wide budget deficit, German government debt also outperformed Treasuries and gilts.

The 10-year Bund yield dropped 7 bps to 2.248% on Friday as the price of the debt rose to also reflect high appetite for haven assets that has driven the Swiss franc, at 0.9264 per euro, 1.7% higher this week.

The benchmark was down 4 bps to 4.392% on the day, despite fading optimism over monetary policy easing.

Money markets currently price about a 58% chance of a Federal Reserve rate cut next month, down from 83% a week ago..

Bets that Trump’s administration will take a lighter-touch approach to regulation also propelled bitcoin to the brink of $100,000 for the first time.

MSCI’s world stock index was set for a 1.1% weekly rise after U.S. artificial intelligence giant Nvidia (NASDAQ:), the world’s most valuable company, briefly hit a record on Thursday despite issuing lacklustre sales forecasts.

Britain’s exporter-heavy advanced 0.7% on Friday towards its best weekly gain since August, as the dollar’s march higher drove sterling down to $1.251, a six-month low.

In Asia, gains for chipmakers sent Taiwanese stocks 1.5% higher on Friday as South Korea’s tech-heavy Kospi rose 0.8% and gained 0.8%.

China’s share index fell 3.1% on Friday, however, as Trump’s threat of 60% tariffs on Chinese goods also prompted Chinese exporters to hold onto dollars instead of swapping them into the yuan, now its weakest since July.

Pictet Asset Management strategist Arun Sai said gold was shining not only because it was a classic haven trade when geopolitical tensions rose, but also because there were few other assets not being hit by the strong dollar.

“It’s a (currency) debasement hedge,” he said.

“You don’t really have another competitor to the dollar.”

Japan’s yen also stayed weak on Friday despite data showing core inflation held above the Bank of Japan’s 2% target in October, leading markets to price about a 57% chance of a 25 bp rate hike in December.

The Japanese currency was last at 154.3 per dollar, 0.1% stronger, after sliding 4% this quarter.