US MARKET WRAP: Bannon sacking stokes risk sentiment

Political headlines dictated price action on a day that was bereft of any major economic news. Following yesterday’s sell-off, the “risk-off” mood carried through Asian and European dealing. But after reports emerged that Trump’s political advisor and chief strategist Steve Bannon was to be fired, risk assets caught a bid (Bannon favours protectionist, isolationist policies).

 

EQUITIES: S&P 500 -0.18 at 2,425.52, DJIA -0.35% at 21,674.38, NDX -0.09% at 5,790.91.

Stocks were soggy in early trade, and the S&P 500 was shaping up for a fourth day of losses. However, the index managed to snap a three-day run of negative closes after Bannon was removed. The major US indices still finished lower on the week.

Friday’s best performing sectors: Utilities +0.64%, Energy +0.60%, Materials +0.11%

Friday’s worst performing sectors: Telecoms -0.54%, Consumer Discretionary -0.46%, Healthcare -0.42%

 

FOREX: The Dollar Index (DXY -0.30%) finished the last trading session of the week slightly higher, though didn’t fancy joining in on the Bannon-induced bounce back. The buck was stagnant over the preliminary University of Michigan Sentiment data, which beat to the upside coming in above the forecast range.

The yen managed to find some ground against a dollar which was generally lower across the board (USDJPY -0.37%) though was more stable against the euro (EURJPY -0.01%). With little news on tap, the EUR also took advantage of a weaker buck and better risk sentiment (EURUSD +0.34%, EURCHF +0.50%).

The CAD (USDCAD -0.82%) was one of the few currencies that saw decent action after CPI in July came in largely as expected, with the core measures ticking up. The data provided little to dissuade the market that the BOC will continue with its recent tilt towards tighter policy.  Other commodity currencies rose in sync with crude (AUDUSD +0.65%, NZDUSD +0.51%).

The EMFX complex was also stronger on a mixture of USD weakness, better risk sentiment, and crude prices rising (USDMXN -0.66%, USDBRL -0.90%, USDZAR -0.76%, USDTRY -0.11%, USDRUB -0.36%).

 

FIXED INCOME: US 10-Year Treasury Futures settled a tick higher at 126-24.

US Treasuries were in demand early doors on general risk-off sentiment (terror attacks in Spain and Finland, as well as continuing doubts that the Trump administration would be able to push through economic reform). However, the Bannon rumours and subsequent confirmation saw yields tick back up to finish the day virtually unchanged.

 

COMMODITIES: WTI futures settled $1.42 higher at $48.51 per barrel; Brent futures settled $1.69 higher at $52.72 per barrel. Crude rose in afternoon trading after reports suggested that Exxon’s Baytown refinery was shut down due to a fire – the refinery was just restarted yesterday following a two-month overhaul. Additionally, news from Washington stoked risk sentiment, and was said to have contributed to crude’s rise.

Gold futures (Dec) settled 0.1% lower at $1,291. Gold popped above $1,300 for the first time in 2017, rising to levels last seen in November 2016. But the yellow metal couldn’t hold on to gains above the figure, ultimately settling slightly lower on the day as risk sentiment picked-up after news from Capitol Hill.

18 Aug 2017 - 21:02- Research Sheet- Source: RANsquawk

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