US MARKET WRAP: Risk appetite sours at the end of the week

Risk sentiment was soured on Friday after reports that Special Counsel Robert Mueller subpoenaed Trump campaign personnel. Stocks were off, Treasuries rose, and haven FX and gold were in demand; oil rallied.

EQUITIES: S&P 500 -0.27% at 2584; Dow Jones -0.40% at 23464; Nasdaq-100 -0.43% at 6340.
Top sectors: Telecoms +0.78%, Energy +0.50%, Materials +0.21%
Bottom sectors: Utilities -0.80%, IT -0.66%, Industrials -0.39%

Stocks have managed eke out a small gain this week, though ended Friday trade in the red, led by losses in the defensive utilities sector as well as in tech. Financials were also under pressure in early trade with the risk-off theme dragging Treasury yields lower.

Telecoms were leading on potential deal activity, with Comcast reportedly interested in buying assets from Fox – assets which Disney was also eyeing.

Retailers continue to be in focus; after hitting an all-time high on Thursday, Wal-Mart slipped on profit-taking. Gap surged after yesterday’s earnings and comp sales beat; numbers from Abercrombie and Fitch and Foot Locker also helped to lift retailers.

FOREX: DXY falls by 0.25% to beneath 93.70

The low-yielding, safe currencies have led gains this week, and were once again being bought on Friday after news Mueller had subpoenaed Trump campaign members dragged the dollar lower.

Gold caught a bid and rose to monthly highs, driven by a combination of the haven bid and technicals, which propelled the yellow metal to $1,297, just short of the psychological $1,300 mark.

The DXY is down for the second straight week. Analysts reason that there seems to be little to drive USD upside in the short-term, with a Fed December hike almost fully priced-in and the obstacles that remain in the way of tax reform.

Next week, FOMC minutes are likely to endorse this narrative. With lawmakers away for the Thanksgiving recess, little if any progress will be made next week, and the Senate will take-up the debate when it returns on 27 November.

Friday’s selling in USDJPY was also supported by some chunky clips being bought in Treasury futures, while CHF also made gains against the EUR and USD on risk aversion.

Despite the Buck’s weakness, the EUR – which rallied in Asia trade – couldn’t make any headway throughout European and US trade, and seems to be consolidating around the 1.18 area.

High-yielding FX in G10 was weaker; the CAD weakened against its US counterpart in afternoon trade after CPI data was in line with xpectations – the BOC core inflation measure was unchanged at 1.6% for the third straight month, and in combination with the cautious commentary from BOC officials this week, does little to suggest that the central bank will be hiking rates at its December meeting.

TREASURIES: US 10-Year T-Note futures settle 1+ tick higher at 124-29

Treasuries took their cue from soft risk sentiment and its European counterparts. With the exception of the 2-year bucket (which printed a fresh nine-year high in Friday trade), yields fell along the curve.

Accordingly, the key spreads flattened, once again; 2s10s narrowed by around 4bps, while 2s30s narrowed just over 5bps, and the much watched 5s30s was lower by just over 2bps. The flattening has been led by expectations that the Fed will tighten policy pushing up short-end yields., while the perception of structurally low inflation has kept longer-end yields lower.

CRUDE: WTI futures settle up $1.41 at $56.55 per barrel; Brent futures settle up $1.36 at $62.72 per barrel

Crude surged on Friday, though sees out the week in the red, snapping a run of five weeks of gains. This week’s losses have been underpinned by US output rising to a record 9.65mln BPD. Additionally, the IEA cut its crude demand forecasts for 2018.

Attention today, however, was on the shutdown of the Keystone pipeline after a 210k gallon leak was reported in South Dakota. There was some chatter that the pipeline would be re-opened on 23 November, though a spokesperson said this was not the case.

There was other bullish news; Ecuador’s oil minister said the nation would drop its request to be exempt from the OPEC production cut deal. There remains some concerns, however, after Russia this week cast doubts over whether it would endorse an extension of the supply cut pact, though commentary from the Saudis in recent days continues to point towards some extension of the agreement when OPEC meets on 30 November.

At the margin, the dollar weakness was said to benefit the crude complex.

17 Nov 2017 - 21:00- Important- Source: RANsquawk

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