Asian markets finished mostly higher Friday as a weaker U.S. dollar helped lift equities and investors shed some of their caution ahead of speeches by the Federal Reserve chair and European Central Bank president later in the global trading day. Chinese investors were especially active ahead of this week’s PMI data and the China A50 Index added 2.1%. Japan’s Nikkei gained on the back of exporter shares, but the Australian S&P/ASX 200 was flat as losses from banks offset gains from miners.
European markets endured a choppy Friday session as investors awaited the speech of Federal Reserve chairwoman Janet Yellen. When Yellen’s speech gave no hint of forward monetary policy for the U.S. the European bourses sold off into the close, finishing the day broadly in the red. A firming Euro against the USD pushed equities lower still, but gains from miners and commodity linked shares helped offset losses and kept the market decline minimal. With ECB president Mario Draghi not slated to speak until 20:00 (GMT) there was also some lingering caution among investors.
U.S. markets were mixed at the close Friday as North American investors had the chance to react to the speech by ECB president Mario Draghi. Like Yellen, ECB President had nothing to say about monetary policy, although he did warn about rising protectionism being a danger to global markets. While nine of the eleven S&P500 sectors finished in the black, losses from the technology and health care sectors led to a decline in the Nasdaq on the day, although it was still 0.8% higher on a weekly basis for its first weekly gain in five weeks.
FOREX
EUR/USD
The pair moved strongly higher on Friday in response to news out of Jackson Hole, where central bankers have refused to discuss monetary policy. Euro-Dollar gained more than 100 pips, closing above the 1.1900 level for the first time since January 2015. The pair began its rally following the speech by Fed chair and made a final push higher following Mario Draghi’s speech as both avoided any mention of monetary policy.
USD/CAD
Weakness in the USD and rising crude prices caused the Loonie to drop on Friday, closing a week that saw it falling in every session. We’ll be closely watching the 1.2400 level as this is where we expect the pair to find support.
Cryptocurrencies
Most cryptocurrencies continued higher Friday and over the weekend, buoyed by continued strength from Bitcoin. Gains were modest for the most part by cryptocurrency standards, and one exception was Ripple, which is continuing to pull back from its recent 50% surge.
Commodities
Metals
Precious metals rallied in response to a drop in the USD Index to a three week low. The U.S. dollar fell in response to the lack of information on monetary policy in Yellen’s speech. Gold briefly tapped the $1,300 level and closed just shy of that key level. Silver gained as well, moving back into positive territory on a weekly basis.
Oil
Crude moved modestly higher on Friday, despite the impending hit of hurricane Harvey on the Texas coast, which is likely to impact refineries in the area and lower demand for crude. There were at least 5 refineries already shutdown on Friday, and flooding could be a major concern that keeps refineries shut for longer than expected. Also helping lift crude was a Baker Hughes’s report showing active rig counts in the U.S. fell for a second week in a row.
Indices
S&P 500
The S&P500 ended modestly higher on Friday as nine of the eleven sectors closed higher. Only the technology and healthcare sectors closed with a modest loss of 0.1%. Leaders for the day were the energy and telecom sectors, and the S&P ended with a weekly gain of 0.7%, snapping a two week losing streak.
FTSE 100
The benchmark British index suffered a small loss on Friday in response to a rally in the Pound versus the USD after Yellen refrained from letting any hints regarding monetary policy. The loss was muted by gains from the mining and oil-gas sectors. Miners have been enjoying a solid rally recently as metals prices are increasing, and energy shares gained as crude traders speculated on the impact of hurricane Harvey on the Texas oil-gas industry.
Stocks
BP (LON:BP)
As crude prices remain depressed, so do the shares of oil producers like BP. The stock also suffers from the negative free cash flow, as that puts the hefty 7.1% dividend yield of the stock in jeopardy. However, with that yield and the strong technical support at the 440 level, the stock could hold up and even rally, if crude were to breach the $50/barrel level.