After four consecutive days of failed upside breakouts in the S&P, some have noticed a change in sentiment, and as Georg Schuh, CIO of Deutsche Asset Mgmt told Bloomberg, “we have moved our view on stocks from ‘buy the dips’ to ‘sell the rebounds’.” adding that “I’m not ruling out one final peak in stocks, but we’re getting late in the cycle and we’re starting to see anecdotal evidence that points toward the end of the rally.

The mood appears to be spreading and world stocks wavered, and the dollar eased on Friday as turmoil in the U.S. administration kept markets watchful at the end of a week scarred by concerns that U.S. tariffs could provoke a trade war. The MSCI All-Country World index was flat after three straight sessions of losses and was set for a weekly fall of around 0.6%, while US futures and global stocks were mixed.

Mood on the last day of the week is so subdued, Cramer’s “pajama traders” have not even attempted their traditional overnight spike in the ES.

European stocks drifted following a mixed session in Asia, while the dollar weakened largely as a result of a jump in Japan’s yen which helped drive down Bloomberg’s dollar index. Japan’s currency rose against all its Group-of-10 peers as the Washington Post reported there was a plan to replace H.R. McMaster and it may be part of a broader shake-up including other senior officials. However, White House Press Secretary Sarah Sanders said there were no plans for any change at the National Security Council.

“A firing would just increase the market’s nervousness about the turnover in the White House administration,” said Mansoor Mohi-uddin, head of currency strategy at NatWest Markets in Singapore. “It would also make investors more concerned about whether officials in the White House who are more in favor of free trade are now leaving the Trump administration.”

Investors continue to weigh the prospects for heightened U.S. trade protectionism after new White House appointee Larry Kudlow said he’d sell gold and buy the greenback, which gained on Thursday. Also on Thursday, the New York Times reported that U.S. Special Counsel Robert Mueller had issued a subpoena for documents, including some concerning Russia, related to President Donald Trump’s businesses.

Trump isn’t giving markets much respite,” said Rabobank analyst Bas van Geffen in a note. “While still vague at best, the subpoena does bring the investigation yet another step closer to the president. Markets certainly didn’t like the added uncertainty.

Overnight technical problems at German exchanges lead to delayed open for various products and muted trading session. The USD/JPY edged through overnight low despite denials from White House that McMaster is getting fired. Emerging market FX underperformed again led by TRY. European equity markets hold small gains, with the mining sector outperforms after metals partially retrace yesterdays sell-off; U.S. equity futures remain in a tight range. Bunds edge higher with most noting the large dropoff in supply next week; USTs back toward yesterday’s high, curve flattens further with focus likely to be on today’s Libor fix.

Asian stocks traded mixed following an indecisive lead from the US and as overnight trade lacked any tangible catalysts to dictate price action. Australia’s ASX 200 (+0.5%) and Nikkei 225 (-0.6%) were mixed with Australia led by Consumer Staples as Wesfarmers shares surged on plans to spin off its Coles supermarket chain, while Nikkei 225 was kept subdued by a firmer JPY and as cover-up allegations were fuelled by reports PM Abe knew of the document alterations days before the public admission. Elsewhere, Hang Seng and Shanghai Comp. were choppy after the PBoC skipped open market operations and instead announced to lend CNY 327bln via its MLF.

Following Asia’s subdued close to the week, European shares found some support in dealmaking activity although the STOXX 600 was on track for a 0.2 percent weekly loss. The final European session of the week saw bourses trading in mixed fashion following from the indecisive lead from Asian and US counterparts. On a sector basis, energy names were outperforming this morning amid the slight push higher in oil prices. UK homebuilders are lagging in the FTSE 100 after Berkeley Group warned over challengers in increasing housing supply further. Elsewhere, NEX Group (+35%) shares surge the most in history after they confirmed that CME Group have approached them.

The Bloomberg Dollar Spot Index gave up its weekly gains on concerns of more White House changes following reports Trump was ready to remove his national security adviser, adding to concern about more political turmoil in Washington. The gauge of dollar strength retreated on Friday as investors with long-dollar positions found themselves under pressure due to the continuing uncertainties surrounding Trump administration. The yen rose against all its Group-of-10 peers as the Washington Post reported there was a plan to replace H.R. McMaster and it may be part of a broader shake-up including other senior officials. White House Press Secretary Sarah Sanders said there were no plans for any change at the National Security Council.

Still, in light of the ongoing funding shortage which yesterday sent the Libor-OIS and FRA-OIS soaring to fresh 6 year highs, it is possible that the USD sees a sharp squeeze higher in the coming days.


Here are the other notable overnight FX moves, from Bloomberg:

  • Haven currencies led by the yen advanced against the dollar and U.S. Treasuries rose after U.S. President Donald Trump was reported to be ready to remove his national security adviser H.R. McMaster, fueling concerns of more turmoil inside the administration, even as it was denied by White House Press Secretary Sarah Huckabee Sanders
  • The euro edges up on the day, trading near the middle of its range since mid-January amid a trend of falling realized volatility seen over the past six weeks, causing Bollinger bands to narrow
  • The pound advanced amid optimism that the U.K. will be able to hash out a deal on the Brexit transition phase with the EU by next week’s summit; still, the U.K. has significant ground to cover on the Irish question if it wants to get a deal on the transition phase next week, according to three European diplomats
  • Slowing factory growth helped prompt the New Zealand dollar to weaken against the Aussie, which itself was under fire from macros and option accounts
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