Global Commentary
Asian markets rallied Friday in response to the strong overnight session on Wall Street, and a rising probability of a U.S. interest rate hike this coming December. Australia’s market, which has been a laggard this year, led the move higher, helped by firming commodity prices and a softer Australian dollar. In Hong Kong the Hang Seng briefly hit a ten year high, while Japan’s Nikkei is trading at a more than two year high and closing in on levels not seen in two decades.
European markets turned lower on Friday, as the lack of any signs of resolution in the Catalonian secession issue were absent. Investors remain cautious about any potential turmoil coming from Spain due to separatist efforts to declare independence in Catalonia. Markets were broadly lower, even in Germany, where manufacturing orders surged higher in August, more than offsetting a July drop in that sector. London’s FTSE ended higher, finishing its best week of 2017 as the Pound continues to soften.
U.S. markets ended mixed, with the Dow and S&P500 ending their run of winning sessions that saw the Dow end higher for seven consecutive sessions, and the S&P500 post new records in eight consecutive sessions. The weakness came following U.S. jobs data that saw payrolls falling for the first month in seven years, although that was attributed to hurricanes Harvey and Irma. The unemployment rate fell to 4.2% from 4.4%, and wages grew by 0.5%, which supports the idea that the Fed will raise interest rates this December.
FOREX
EUR/USD
The pair dropped during the session in response to ongoing turmoil in Spain, but by the close had recovered back to unchanged levels just above the 1.1700 handle. That level is setting itself up as fairly good support for the pair, but that support could break if markets get an independence declaration from Catalonia this week.
GBP/USD
The pair fell for the sixth consecutive session Friday, and after slicing through support at the 1.3200 level closed all the way down at the 1.3050 level in a massive drop. The weekly chart shows a similarly bearish picture, with the pair printing a huge bearish weekly candle, and the third weekly red candle in a row. Concerns over Brexit negotiations, and expectations for a December U.S. interest rate hike, are likely to see the pair continue lower in the coming week.
Cryptocurrencies
With the SegWit2X hard fork of Bitcoin just around the corner it appears cryptocurrencies are content to remain fairly muted in their action. Bitcoin is creeping higher, but can’t get past resistance at the $4,400 level. Ethereum is beginning to take a leadership role and broke through resistance at the $300 level over the weekend. Litecoin is currently a laggard, and is edging lower, looking as if it could test the $50 for support soon.
Commodities
Metals
Precious metals gained Friday, despite U.S. employment data pointing to an increased likelihood for a December interest rate hike from the Fed. There seems to be a feeling that because the data was skewed by hurricane’s Harvey and Irma there will be a sharp correction in the data next month that could impact the Fed’s decision.
Oil
Crude fell on Friday, contributing to the first weekly loss for the commodity in five weeks as traders assessed potential impacts from tropical storm Nate, which is expected to turn into a hurricane over the weekend before hitting the Gulf Coast refineries. Already roughly 70% of Gulf crude production is shut-in as the storm bears down on the region.
Indices
Nasdaq
The technology heavy index was the only major index to keep its winning streak intact on Friday as technology shares outperformed on a day in which eight of the eleven S&P sectors posted losses. Investors remain largely bullish on technology as shares are more fairly priced following a September pullback and consolidation in the sector.
IBEX 35
The volatility in the Spanish index continues as investors see no end to the separatist movement in Catalonia. After rising Thursday the IBEX 35 fell modestly Friday, with banking shares leading the way lower. Until there is some resolution to the current standoff between Catalonia separatists seeking independence and the Spanish government, the index will likely see continued selling as investors will remain too cautious to step up and buy Spanish equities.
Stocks
BBVA (MC:BBVA)
If you’re looking for volatility in your trading you won’t have to look much further than BBVA, the second largest bank in Spain. Given the likely ongoing turmoil over the potential secession of Catalonia from Spain, shares of BBVA should see some large moves in both directions as investors react to new rumors and news regarding the changing politics in Catalonia. The banking industry promises to be heavily influenced by political instability in Spain, making BBVA a good candidate for a current watch list.