In the final day of the week, it has again been a story of currencies and commodities setting stock prices, however instead of yesterday’s Yen surge which slammed the USD/JPY as low as 107.67 and led to a global tumble in equities, and crude slide, today has been a mirror image after a modest FX short squeeze, which sent the Yen pair as high as 109.1, before easing back to the 108.80 range. This, coupled with a 3.5% bounce in WTI, which is back up to $38.54 and up 4.9% on the week as speculation has returned that Russia and OPEC members can reach a production freeze deal on April 17, led to a global stock rebound which will see the S&P open back in the green for 2016.

This is the “unchanged for 2016” line:

And while it may seem that markets haven’t really gone anywhere this week, and we are back almost where we started off, it has been anything but a smooth ride because, in Bloomberg’s words, “markets whipsaw and currency volatility approach the highest since 2011” as shown in the chart below.

European equities trimmed a fourth weekly decline, their longest streak since October 2014, and U.S. index futures signaled the Standard & Poor’s 500 Index will climb after the biggest plunge since February. The yen’s first drop in six days buoyed Japanese shares, while Spanish 10-year bonds pared their worst week this year. Gold and Treasuries fell as demand for havens eased.

“Markets are so unpredictable right now – there are risk-on days and there are times when everyone exaggerates the negatives,” Dirk Thiels, head of investment management at KBC Asset Management in Brussels, told Bloomberg. “The rebound was just about bringing valuations back to average, and not really a sign that any bearish sentiment is easing. Maybe a better earnings season can change that, but right now you don’t need a lot for markets to get nervous.”

Late yesterday afternoon, the four Fed chairs sat down, in a session in which the Fed’s mission to be ” central planner of the world” was greenlight, after Alan Greenspan said global developments must inevitably be taken into account by U.S. policy makers, which Yellen, who was also on the panel, said she and her colleagues carefully consider the impact of their actions on the rest of the world.

In any case, for now it seems that futures and stocks will close off the week on a positive note and green for the year.

Market Wrap

Global News

Looking at regional markets, we start in Asia where equities traded lower mostly across the board following similar weakness on Wall St. where a decline in energy and losses in financials dampened sentiment. Nikkei 225 (+0.5%) initially underperformed on the significant JPY strength allied with index giant Fast Retailing declining to its lowest level since 2013 after poor earnings and cutting its guidance. However, Japanese stocks then recovered in late trade amid short-covering alongside a rebound in USD/JPY. Elsewhere, mainland China conformed to the dismal tone with the Shanghai Comp (-0.8%) weighed following a lacklustre PBoC liquidity injection of CNY 20bIn for a total net weekly drain of CNY 275b1n. 10yr JGBs traded higher following the risk-averse tone in Asia and managed to retain gains despite improving risk appetite in Japan, while the BoJ were also in the market to acquire JPY 470b1n in government debt.

European equities have pared some of yesterday’s losses as risk-on sentiment returns to the fray following the gains in energy prices as WTI crude futures surges above USD 38/bbl. Allied with this, gains in financials has also attributed to the upbeat tone, with Italian banks leading the charge. Subsequently, notable outperformance has been observed in the FTSE MIB after source reports noting that a solution to the systemic weakness in Italian banks could be hatched as soon as Monday. As a result of the gains across EU bourses, Bunds have grinded lower throughout much of the morning, while peripheral bonds gain on the back of the aforementioned optimism surrounding plans to resolve NPLs in the Italian banking sector.