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Stocks end week mixed Banks drag US lower – Europe higher; Oil new 3-year highs; Gold driven higher by global tensions; USDJPY fails to hold breakout

Apr 16, 2018 | Daily Market Outlook

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US markets – closed lower on Friday, shares dragged lower by a weaker banking sector. The Dow Jones fell by 122.91. The S&P500 lost 7.69 pts and the NASDAQ closed 33.60 points lower.

Citigroup, Wells Fargo and J.P. Morgan Chase all reported quarterly earnings and revenue that surpassed analyst expectations. Bank shares initially traded higher before falling, as the strong results were already priced in. The SPDR S&P Bank ETF (KBE) fell 1.6 percent, while J.P. Morgan dropped 2.7 percent. “I don’t see how they don’t do well,” said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research, regarding financials during the earnings season. “You’ve got rates rising as well as higher market volatility, so they should benefit from that.”

The yield on the two-year Treasury note hit a high of 2.373 percent, its highest level since Sept. 9, 2008, when the two-year yielded as high as 2.375 percent. Yields retreated off session highs later in the day amid a drop in equity markets. Despite Friday’s loses markets closed out with weekly gains.

European markets – ended the week higher with minor gains, the Stoxx 600 closed 0.12 percent higher, Basic resources Friday’s best performing sector closing close to 1.4 percent higher. The FTSE added 6.22 points, the DAX gained 27.39 points and the CAC closed 5.80 points higher. Retail was Friday’s weakest sector dropping late in the session by 0.8%. The Tech sector was also weaker, Sage losing 8.2% after issuing a profit warning.

Oil – closed higher on Friday as geopolitical tensions continue to support prices. Price posted an 8.6% weekly gain. Buyers hit 67.60 in Friday’s trade setting new 3-year highs. Price failed to hold highs closing at 67.24. “The Syrian escalation risk cannot be fully written off, but we view that it deserves less of a premium than three days ago,” Petromatrix said in a note. “It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the IEA said.

Forex – risk majors made strong gains to the USD pre-New York. The AUD and GBP trading up to 50 pips higher. Gairs were parred into the NY session as dollar bulls repositioned. The GBPUSD traded at 11-week highs hitting 1.4229. The EURUSD traded flat after sellers failed to test Thursday’s lows. As with the USD, the JPY traded lower Friday as the majors made strong gains throughout the day. Sellers cut gains into the NY session. Majors finished higher but well off highs. The GBPJPY pulled back a 117 pip rally. Gold jumped as global tensions continued to support prices adding close to $11. Bitcoin continues to rally adding over $400 on Friday it’s one to watch, buyers added $1164 last week.

USDJPY – looks to be stalling this morning, buyers have been unable to hold Friday’s breakout with active sellers from 107.45 – 107.80. Are we going to see a deeper test low from this area?

Good trading from Eightcap.

Sources; CNBC.  All times are AEST

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