Global Commentary
Asian markets were cautiously higher for the most part on Friday, as investors had little reaction to trade data released by China. Instead the focus seems to be on the inflation data to be reported by the U.S. and China after Asian markets close. Japan’s Nikkei made a notable move as it closed above the 21,000 level for the first time since 1996. That level marks very strong resistance for the Nikkei stretching back to 1993.
European markets finished mixed on Friday as the second day of no economic news in the region kept investors mostly on the sidelines. The DAX in Germany edged higher to a new record high, but France and Spain saw their respective benchmark indices slip modestly lower. There was strength from the mining sector in response to the Chinese trade data, and oil and gas stocks benefitted from rising crude prices. London’s FTSE fell as the Pound rallied to a two week high on hopes for progress in the Brexit negotiations.
U.S. markets gained on Friday as the weaker than expected inflation data caused some doubts over a December interest rate hike in the U.S. Technology and materials led the way higher, with the latter getting a boost from the strong Chinese trade data released earlier in the day. There was also a better than expected reading on consumer confidence in the U.S., which helped lift stocks further. Investors remain optimistic over a strong earnings season, which should keep a bullish bias in markets.
FOREX
EUR/USD
The pair declined for a second consecutive day Friday, closing out the session just above the 1.1800 level. Considering the current geopolitical threats in the European Union we expect the Euro to struggle. The threat of a December U.S. interest rate hike declined somewhat next week, but we expect traders to continue as if the rate hike will occur, which should have this pair testing the 1.1700 level at some point this week.
USD/JPY
The pair dropped fairly significantly on Friday, breeching the support at the 112.00 level and closing around the 111.50 level. As markets opened late Sunday Asian traders took the pair higher, with a test of the 112.00 level as resistance looking imminent.
Cryptocurrencies
The cryptocurrencies continued gaining on Friday, with Bitcoin settling around $5,600 for a 6.5% gain after trading as high as $5,900 intra-day. Ethereum finally joined in the rally, surging higher by 11.6% as it played catch-up to Bitcoin’s gains. Litecoin also continued higher, but resistance at the $60 level capped its gains. Ripple struggled as it remains stuck near the $0.26 support level, but DASH extended its gains above the $300 level.
Commodities
Metals
Precious metals rallied on Friday following U.S. inflation data that was cooler than expected, raising questions as to whether the Federal Reserve would raise interest rates in December, as well as putting downward pressure on the U.S. dollar. The rally took gold above the key $1,300 level, although better than expected consumer confidence data pulled it off its daily high.
Oil
Crude gained Friday on bullish Chinese trade data showing increasing imports of crude. There was also geopolitical risk for the oil rich Middle East as President Trump threatened to decertify the Iran nuclear deal. The Chinese import data showed crude imports of roughly 9 million barrels per day, the second highest level of crude imports ever for China.
Indices
Nasdaq
The Nasdaq outperformed on Friday as technology led gains in the markets. Gains were modest however as weakness from the health care sector weighed on the gains from technology. The small gain took the Nasdaq to a new record high, but even so results from the index have been muted, with the weekly gain of just 0.2%. It was the third weekly gain for the Nasdaq, which is a positive trend, but exhaustion may be setting in.
FTSE 100
The British benchmark index came under pressure on Friday as news emerged that the U.K. may get a two year extension in its Brexit transition from the EU. The news sent the Pound higher, which caused equities to fall broadly. The one bright spot was the miners, which made solid gains in response to the trade data released earlier from China, showing strong imports in September, which benefits British mining companies.
Stocks
Goldman Sachs (NYSE:GS)
The investment bank will report third quarter results before the bell on Tuesday, likely setting the stage for the financial sector for the rest of the trading session. Currently the stock is trading just below the $250 level, which is also its all-time high from 2007, and a significant resistance level for the stock. Based on what we’ve seen already from the financial sector Goldman Sachs could well surprise to the upside on revenues, although revenue and earnings from the trading desk are likely to be weak. But that should already be baked into the stock, and given the increased volatility in the crude and metals this past quarter, Goldman could well surprise, which would give the stock an upside boost.