Asian markets headed broadly lower Friday in response to increased aggressions between the U.S. and North Korea, including a statement from the North Korean foreign minister that the regime is considering a nuclear test in the Pacific Ocean. Risk aversion flared as a result, sending the Yen higher and causing Japan’s markets to reverse their early gains. China was lower after Standard&Poor’s downgraded the sovereign debt. Australia’s equity market bucked the falling trend, as a weaker Australian dollar offset the downward pressure the market is feeling due to falling iron ore and other metals prices.
European markets managed gains on Friday as strong PMI data from across the Eurozone helped offset investor worries over a potential nuclear weapons test. Both Germany and France reported PMI’s that were at 76 and 77 month highs respectively, and the composite Eurozone PMI was at a four month high. There seemed to be caution across the EU over the Sunday German Federal Elections, although Germany’s DAX did edge slightly lower by 0.1% by the close. London’s FTSE erased early gains and rose solidly to a 0.6% gain following a speech by PM Theresa May, in which she outlined Brexit plans.
U.S. markets slogged along just below unchanged levels for most of the day Friday as rising geopolitical tensions weighed on risk appetite. A rally late in the day sent most of the major benchmark indices mildly into positive territory, although the Dow Industrials finished with a slight loss, even though 22 of the 30 companies in the index were in positive territory at the close. Manufacturing PMI was higher than expected, but services PMI offset that as it was weaker than expected. The next important U.S. economic data point doesn’t come until Tuesday when we get a reading on U.S. consumer confidence.
FOREX
EUR/USD
The pair rose to tap 1.2000 intra-day on Friday, but then dropped back and finished basically unchanged as traders decided to take the cautious approach ahead of German Federal Elections. The course of the pair in the coming week will be influenced by the results of that election, meaning we’ll either get a pop above the resistance at 1.2000, or a drop back to support at 1.1850.
NZD/USD
The weekend results of the New Zealand elections could see this pair pulling back after it settled near the resistance at 0.7350 on Friday. New Zealand’s ruling National Party won the election, but didn’t garner enough votes to rule outright, and will now be forced to form a coalition. The details of that could take weeks to sort out, and in the meantime there could be enough uncertainty to pressure the New Zealand dollar.
Cryptocurrencies
The weekend results of the New Zealand elections could see this pair pulling back after it settled near the resistance at 0.7350 on Friday. New Zealand’s ruling National Party won the election, but didn’t garner enough votes to rule outright, and will now be forced to form a coalition. The details of that could take weeks to sort out, and in the meantime there could be enough uncertainty to pressure the New Zealand dollar.
Commodities
Metals
Precious metals gained Friday on the safe-haven demand generated by the prospects for a North Korean nuclear weapons test in the Pacific over the weekend. Even with the days’ gains gold and silver posted a weekly loss as they came under pressure earlier in the week after the Federal Reserve hinted at a December interest rate hike.
Oil
Crude finished higher on Friday, with the WTI crude settling at a four-month high after a meeting of OPEC producers showed that compliance with the production cuts set by the organization is at an all-time high. Both the WTI crude and Brent crude posted weekly gains, third consecutive for WTI and the fourth consecutive for Brent.
Indices
Dow Industrials
The Dow finished in the red Friday, losing 0.04% at the close. Still, gains were broad-based, with 22 of the 30 Dow components rising. Those gains were offset by more than 1% losses for Microsoft (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ), Travelers Companies, and United Technologies (NYSE:UTX).
Dax
Germany’s benchmark index came under cautious pressure on Friday afternoon, giving back gains as investors decided to stay on the sidelines ahead of the elections. While expectation is that Angela Merkel will retain the chancellorship, there are questions regarding her choice for a coalition partner, and that choice will have implications for the Germany economy and fiscal decisions moving forward.
Stocks
Apple
Shares of Apple have turned in their worst weekly performance during a product launch ever, dropping 5% in the past week amid sub-par reviews for the new iPhone 8 and iWatch Series 3, which also suffered from connectivity issues. It makes analysts wonder if Apple shares (NASDAQ:AAPL) might be heading into correction territory. If so, the stock could drop through the support at $140, and continue significantly lower as there is little technical support until the $100 level.