Market Roundup
• Trade wars are good,' Trump says, defying global concern over tariffs.
• EU may target $3.5 bln of U.S. imports for trade retaliation.
• U.S. Feb ISM-New York Index, 770.2, 767.9 previous.
• U.S. Feb ISM NY Biz Conditions, 54.5, 72.5 previous.
• U.S. Feb U Mich Sentiment Final, 99.7, 99.5 forecast, 99.9 previous.
• U.S. Feb U Mich Conditions Final, 114.9, 115.1 previous.
• U.S. Feb U Mich Expectations Final, 90.9, 90.2 previous.
• U.S. Feb U Mich 1-Yr Inf Final, 2.7%, 2.7%.
• U.S. Feb U Mich 5-Yr Inf Final, 2.5%, 2.5% previous.
• U.S. ECRI Weekly Index w/w, 150.3, 149.0 previous, 149.1 revised.
• U.S. ECRI Weekly Annualized w/w, 6.9%, 7.5% previous.
• CA Dec GDP MM, 0.1%, 0.1% forecast, 0.4% previous.
• CA Q4 GDP QQ, 0.4%, 0.4% previous.
• CA Q4 GDP QQ Annualized, 1.7%, 2.0% forecast, 1.7% previous, 1.5% revised.
• Setting out Brexit vision, Britain's May appeals to EU to show flexibility.
• Cryptocurrencies failing as money, but technology has promise-Carney.
• EU, Mercosur extend trade talks, Paraguay sees deal soon.
Looking Ahead - Economic Data (GMT)
• 4 Mar 22:30 Australia Feb AIG Services Index, 54.9 previous
• 5 Mar 00:30 Japan Feb Services PMI, 51.9 previous
• 5 Mar 00:30 Australia Jan Building Approvals, 5.0% forecast, -20.0% previous
• 5 Mar 00:30 Australia Jan Private House Approvals, 1.0% previous
• 5 Mar 00:30 Australia Q4 Business Inventories, 0.5% forecast, 0.2% previous
• 5 Mar 00:30 Australia Q4 Gross Company Profits, 2.0% forecast, -0.2% previous
• 5 Mar 00:30 Australia Q4 Company Profits Pre-Tax, 3.8% previous
• 5 Mar 01:45 China Feb Caixin Services PMI, 54.7 previous
Looking Ahead - Events, Other Releases (GMT)
• 5 Mar 08:00 Riksbank's Stefan Ingves speaks at the Expert Group on Public Economics' seminar on possibilities and challenges for development in the coming period – Stockholm
• 5 Mar 15:30 Deutsche Bundesbank's Andreas Dombret speaks on the subject "Where do we go from here? The future of U.S.-EU financial relations after the Basel III finalisation" - Washington, D.C.
• 5 Mar 17:00 Fed's Randal Quarles speaks before a luncheon at the Institute of International Bankers Annual Conference - Washington, D.C.
• 5 Mar 17:00 Fed's Charles Evans speaks at the annual conference of the Institute of International Bankers - Washington, D.C.
Currency Summaries
EUR/USD is likely to find support at 1.2248 levels and currently trading at 1.2325 levels. The pair has made session high at 1.2330 and hit lows at 1.2286 levels. The euro rose higher against US dollar on Friday as the dollar weakened as President Donald Trump's proposal to impose hefty tariffs on steel and aluminium imports raised prospects of a trade war that could prove damaging to the U.S. economy. Friday’s sell-off came just as the dollar had risen to multi-week highs on the back of strong data and an upbeat view on the economy from Federal Reserve Chairman Jerome Powell, which reinforced expectations of three or more interest rate hikes this year. Trump announced on Thursday he would impose heavy tariffs on imported steel and aluminium to protect U.S. producers, risking retaliation from major trade partners such as China, Europe and Canada. Barack Obama imposed tariffs on Chinese steel imports in May 2016 and George W. Bush against EU steel imports in March 2002. Those moves saw the dollar fall 1.5 percent and 6 percent respectively in the subsequent months. The dollar index, tracking it against a basket of major currencies, fell 0.4 percent to 89.935. The euro, meanwhile, was up 0.5 percent versus the dollar, with the focus on Sunday's Italian parliamentary election and the level of support for populist agendas that could have a wider impact on the European Union.
GBP/USD is supported in the range of 1.3700 levels and currently trading at 1.3786 levels. It reached session high at 1.3798 and dropped to session low at 1.3750 levels. Sterling slipped against the dollar on Friday after Prime Minister Theresa May urged the European Union to show more flexibility in talks on a future relationship but failed to convince investors a smooth Brexit transition deal is assured. In a week in which sterling has fallen, the pound was initially unmoved by May's comments but limped slightly lower against both the euro and dollar as the speech came to an end. Against the euro, sterling fell as much as 0.5 percent to 89.470 after trading down 0.2 percent at 89.24 before May delivered her long-awaited speech. Versus the dollar, sterling gave up its small gains to trade down 0.1 percent at $1.3783 in the late US session. The pound has suffered its worst week against the euro since October after comments by the EU's chief Brexit negotiator, Michel Barnier, on Wednesday that a deal was far from guaranteed thrust political risk back onto the centre stage. Amid a broad rebound in the dollar, sterling in February suffered its worst month versus the greenback since October 2016. On Friday, the dollar fell back against a basket of currencies but the pound failed to benefit. Meanwhile, traders await the outcomes of elections in Germany and Italy on Sunday.
USD/CAD is supported at 1.2803 levels and is trading at 1.2898 levels. It has made session high at 1.2860 and lows at 1.2849 levels. The Canadian dollar weakened against its U.S. counterpart on Friday, adding to 10-week lows as data showed slower-than-expected growth in the domestic economy and investors braced for planned U.S. tariffs on steel and aluminium. Trump unveiled the tariffs on Thursday but did not make clear whether they would apply to Canada and Mexico, which together with the United States are trying to renegotiate the 24-year-old North American Free Trade Agreement. Canada sends 75 percent of its goods exports to the United States and would be vulnerable if a trade war erupted. Canada is also the largest supplier of both steel and aluminium to the United States. The price of oil, one of Canada's largest exports, was set to post its first weekly fall in three weeks on Friday as equity markets fell and as U.S. crude inventories climbed. Canada's gross domestic product grew by an annualized 1.7 percent in the final quarter of 2017, short of economists' forecasts for 2.0 percent, data from Statistics Canada showed. The Canadian dollar was trading 0.3 percent lower at C$1.2905 to the greenback. The currency's strongest level of the session was C$1.2822, while it touched its weakest since Dec. 19 at C$1.2905.
AUD/USD is supported around 0.7710 levels and currently trading at 0.7750 levels. It hit session high at 0.7766 and made session lows at 0.7736 levels. The Australian dollar hovered near recent lows against the dollar on Friday after U.S. President Donald Trump imposed a tariff on imported steel and aluminium, triggering fears of a global trade war. Australia, as an open economy, relies heavily on international trade and capital. It is particularly vulnerable to a U.S.-led trade war, which threatens the outlook for global growth and the demand for commodities. Prior to Trump's announcement, the dollar had enjoyed a rebound from three-year lows plumbed mid-February as hawkish-sounding comments by new Federal Reserve Chair Jerome Powell sharpened expectations towards the central bank raising rates as much as four times this year. The dollar had sank to the three-year low last month, partly on fears of U.S. protectionism, and such worries were revived just as the currency looked set to shake off weakness suffered through much of February. The Australian dollar went as deep as $0.7713 on Thursday, the lowest since late December. It bounced in the early hours of Friday to last quote at $0.7758.The rebound was not large enough and the Aussie is still set for a second straight week of losses.
Equities Recap
European shares fell to six-month lows on Friday after Donald Trump said the United States would impose tariffs on imported steel and aluminium, prompting worries about a global trade war.
UK's benchmark FTSE 100 closed down by 1.82 percent, the pan-European FTSEurofirst 300 ended the day down by 2.07 percent, Germany's Dax ended down by 2.2 percent, France’s CAC finished the day down by 2.4 percent.
The S&P 500 ended another turbulent week on an upbeat note Friday, but major indexes posted losses for the week as U.S. President Donald Trump's threat to impose import tariffs on steel and aluminium rattled investors.
Dow Jones closed down by 0.31 percent, S&P 500 ended up by 0.48 percent, Nasdaq finished the day up by 1.04 percent.
Treasuries Recap
U.S. Treasury yields rose on Friday, with the 10-year yield bouncing back from a three-week low as the Bank of Japan's chief hinted at a possible exit from its ultra-easy policies if inflation hits its target in its fiscal 2019.
The benchmark 10-year Treasury yield was 2.853 percent, up 5.1 basis points from late on Thursday. It touched a three-week low of 2.793 percent earlier on Friday.
The two-year yield hit a two-week low of 2.197 percent before moving to 2.234 percent, up 2.8 basis points from Thursday.
The spread between five-year and 30-year yields was 50.6 basis points, wider than the 50.2 basis points late on Thursday.
Commodities Recap
Gold prices rose on Friday as the threat of a global trade war pushed equities and the U.S. dollar lower and spurred demand for assets such as bullion that are broadly seen as safe-haven investments.
Spot gold rose 0.5 percent at $1,322.54 per ounce by 1:43 p.m. EST (1843 GMT).U.S. gold futures for April delivery settled up $18.20, or 1.4 percent, at $1,323.40 per ounce.
Oil prices rose on Friday as Wall Street stocks bounced off session lows, but benchmark crude futures posted their first weekly decline in three weeks on fears U.S. plans to impose tariffs on steel and aluminium could squeeze economic growth and jitters about rising U.S. crude production.
Brent futures rose 54 cents, or 0.9 percent, to settle at $64.37 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 26 cents, or 0.4 percent, to settle at $61.25.For the week, Brent was down about 4 percent and WTI down more than 3 percent.
