The S&P 500 advanced to a fresh all-time high on Thursday, as the dovish Federal Reserve expectations fueled the equity purchases around the globe this week. Slack Technologies Inc (NYSE:WORK) made a solid debut in New York Stock Exchange. The price surged to $42 per share, well above the reference price of $26 and closed the session at $38.62.
The S&P500 energy stocks rallied 2.21%, as oil recorded its biggest advance in two years following the news that Iran downed a US drone. WTI crude jumped 5.4% on the session.
The FTSE 100 closed 21 points higher at 7424p on Thursday. BP (LON:BP) (+1.42%) and Royal Dutch (+1.04%) added more than 10 points to the index.
The Canadian dollar advanced past 1% versus the greenback. The USDCAD traded below the 1.32 mark for the first time since March. Yet the Loonie’s rally could be spoiled this Friday, if the retail sales data confirm a slowdown in activity. The core retail sales may have risen 0.2% m-o-m in April versus 1.1% printed a month earlier.
Asian markets fell; energy and mining stocks outperformed
Asian markets traded mixed on Friday. Some investors realized profits at the end of the most profitable week since January, as protesters in Hong Kong gathered and began moving toward the police headquarter, demanding Carrie Lam’s resignation and the withdraw of the extradition bill. Stocks in Hong Kong fell 0.26%. The S&P (-0.24%) and the Dow (-0.22%) futures eased.
Japanese stocks felt the pinch of a stronger Japanese yen. The yen appreciated 1.40% against the US dollar this week, while the Bank of Japan’s (BoJ) Governor Kuroda sounded quite detached in the face of the falling JGB yields. He said that some flexibility in yields is acceptable. It is perhaps just a matter of time before the decline in Japanese yields ring the alarm bell among the Japanese policymakers. The inflation excluding fresh food fell from 0.9% y-o-y to 0.8% in May, as the preliminary PMI read hinted at a faster contraction in manufacturing in June.
Australian stocks were offered as well, except for energy (+1.95%) and mining (+0.52%) stocks.
The FTSE futures (-0.36%) edged lower, hinting at a negative start in London. The FTSE 100 is expected to open 20 points lower at 7404p. The rebound in pound could curb the appetite in the UK stocks, but investors should continue piling in the mining stocks with gold trading above the $1400 level. Energy stocks could also outperform regardless of a stronger pound before the OPEC+ meeting scheduled on July 1 and 2.
The Bank of England’s (BoE) monetary policy committee voted 9-0 to maintain the interest rates unchanged in the UK and revised the short-term growth forecast from 0.2% to 0.0% at Thursday’s meeting. Policymakers recognized that the ‘perceived likelihood of no-deal Brexit has risen’ with Boris Johnson preparing to take the lead of the country to drive the UK out of the European Union with, or perhaps without a deal.
This being said, Governor Mark Carney still seemed positive on a smooth Brexit and mentioned the need for tighter rates in the coming months. However, the BoE hawks seemed little convinced by the possibility of a rate hike in the foreseeable future. The activity in UK sovereign markets hint at a higher probability for a rate cut instead. The pound advanced to 1.2727 against the US dollar, the recovery was mainly due to a broad-based USD weakening.
The EURUSD is testing the 200-day moving average (1.1310) on cheaper dollar. The Eurozone preliminary PMI for June is due today. The data could confirm a softer contraction in manufacturing and a faster expansion in services this month. A strong read could further revive the appetite in euro and pave the way for a recovery to 1.1350, June resistance.
Lira could give back gains before the weekly closing bell
The Turkish lira benefited from the rising spread between the Turkish and the US yields this week. The USD/TRY fell below the 5.80 mark as carry traders entered long-lira positions, despite the US sanctions threat and the data showing a sharp decline in industrial production in April.
The positive sentiment in lira could reverse before the weekly closing bell. Some investors could liquidate their long lira positions before Sunday’s controversial rerun of mayor election in Istanbul. Traders should remain ready for higher volatility in lira and lira-denominated holdings at the start of next week.
The tight non-lira liquidity could emphasize an eventual short squeeze in USD/TRY forcing the country to tap into the central banks’ decade-low reserves.