LONDON (Reuters) – Equity markets and the dollar zigzagged higher on Friday as hopes for an economic recovery and easing in global bond market yields during the week offset the strains of the world’s most expensive traffic jam. world.
As the last full week of a hectic first quarter came to a close, traders watched the desperate efforts to release a stranded supertanker on one of the world’s most important commercial arteries, the Suez Canal, as well as the growing global count. of COVID-19 cases. .
Chinese markets had helped Asia rebound from a 3-month low overnight by overcoming its latest concerns about relations with the US, while a nearly 3% rise in commodity stocks, a euro Weaker and upbeat German data kept Europe on track for a fourth consecutive weekly gain. [.EU]
Wall Street was expected to rise higher at the open [.N].
Bond yields also rose slightly on the day, but 10-year Treasuries were on track for their biggest weekly yield drop since June. For German bonds it was 3-1 / 2 months, as the eurozone coronavirus problems support safe haven assets there. [GVD/EUR]
The euro struggles are part of that too, but the dollar bulls were firmly in charge of stepping up the US vaccine program.
The dollar’s 0.3% rise on Friday meant it had recovered most of its post-election decline in the United States. Emerging market currencies, by contrast, have had their worst run of the year this week, unaided by a near 10% drop in the Turkish lira after the firing of another central bank governor. [EMRG/FRX]
“We came out of 2020 with the validation of the consensus view that the dollar would weaken,” said Vincent Manuel, chief investment officer at Indosuez Wealth Management.
“We have woken up in 2021 to the reality that the United States is growing much faster than Europe … so we have a massive divergence.”
Weekly money flow data from Bank of America showed that global investors have been rushing to seek safety amid this week’s drama. They injected $ 45.6 billion in cash funding, the largest since April 2020 when COVID-19 was spreading rapidly.
However, the weekend news flow has been a bit friendlier.
Business morale in Europe’s largest economy, Germany, has returned to its best level in nearly two years thanks to the recovery in global demand for manufactured goods, data showed on Friday.
Figures from the US Department of Labor had seen US jobless claims fall to a low of a year on Thursday, while President Joe Biden doubled his short-term goal for vaccines in the US. 200 million injections in his first formal press conference as president.
“We now expect the US dollar to strengthen a bit over the next two years as the US economy outperforms,” said analysts at Capital Economics, raising their dollar forecasts.
Turkey’s markets were struggling to settle after the close to 10% drop in the lira triggered by the latest firing of central bank chairman Tayyip Erdogan, which has raised concerns about a full-blown crisis that would require capital controls. [EMRG/FRX]
“If you can’t raise rates and you don’t have enough reserves, then you have no choice if you want to limit exchange rate depreciation,” said Morgan Stanley’s chief economic adviser and former head of the IMF’s European department. Reza Moghadam, he said.
However, top-tier Chinese stocks rallied more than 2% after a three-day losing streak, which, like emerging market stocks generally, had left them at their lowest level for the year.
“All the sanctions (against China) so far have been largely symbolic and should have little economic impact. But the Sino-US confrontation is hurting market sentiment. It could take some time for them to reach a compromise, ”said Yasutada Suzuki, head of emerging markets investment at Sumitomo Mitsui Bank.
The dollar also rose to a new nine-month high against the Japanese yen of 109.44 yen. The euro licked its wounds at $ 1.1794 after falling to a four-month low on Thursday.
Ongoing efforts to dislodge the tanker in the Suez Canal saw oil prices rebound a bit from a 4% drop on Thursday, although they are on track for their third consecutive week of losses due to concerns about increased demand reduction. [O/R]
In addition to Europe, major developing economies like Brazil and India are also struggling with a resurgence in COVID-19 cases.
Brent was at $ 62.62, up 1.08%, US crude was last up 1.33% at $ 59.35 a barrel, gold was flat and copper, although more than 1% higher on the day, was still in its recent range of $ 8,600 – $ 9,200 a ton. [/MCU3=LX]
Recovering from the blockade in Suez, shipping rates for oil product tankers have nearly doubled this week, and several vessels veered off the vital waterway.
Report by Marc Jones; Editing by Andrew Cawthorne and Susan Fenton