Investing.com – Top 5 things that rocked U.S. markets this week
1. Rising Bond Yields Make Bold Return
Rising U.S. bond yields were the main driver of market direction on Friday as the 10-year treasury yield and 2-year treasury yield rallied sharply, prompting wild swings lower in U.S. stock markets.
The 10-year treasury yield rose to a high of 3.128% as mostly positive data this week including two regional manufacturing surveys pointing to signs of inflation, reassuring investors the U.S. economy remains on solid footing.
“Our forecast for the end of the year for the 10-year is 3.20%, which means this week’s trading action moved us roughly half the distance to our year-end target,” Wells Fargo said.
Mixed earnings from a slew of retailers including Walmart Inc (NYSE:WMT), Macy’s Inc (NYSE:M) and Home Depot Inc (NYSE:HD) did little to avert a weekly loss in US stock markets.
Macy’s was the pick of the bunch after reporting earnings that topped consensus estimates on both the top and bottom lines, while same-store sales grew for the second straight quarter.
Escalating U.S.-China tensions also weighed on sentiment as President Trump said he doubted whether the second round of trade talks - which got underway on Thursday - would be successful.
The Dow Jones posted a weekly loss.
2. Crude Oil Prices Notch Third Weekly Win
Crude oil prices notched their third week of gains in row as the prospect of a shortage in global oil supplies continued to underpin demand, prompting traders to add to their bullish bets.
Investor expectations for a global oil supply shortage comes amid a U.S. announcement this month that it would renew sanctions on Iran – expected in two waves – on Aug 6. And Nov. 5, crippling the Islamic Republic’s energy exports.
Data from the Energy Information Administration showing U.S. oil stockpiles fell for the second straight week also supported sentiment on oil prices.
Crude futures settled 21 cents lower on Friday, as data showed U.S. oil rigs remained at three-year highs.
3. Dollar Hits 5-Month High
The dollar bounced back strongly from a weekly loss supported by a rally in U.S. bond yields and a slump in the euro.
Mostly bullish U.S. economic data, sent bond yields soaring, renewing expectations for a faster pace of rate hikes, helping the greenback to a five-month high against its rivals.
EUR/USD posted a sharp weekly drop as Italy's 10-year bond yield sank amid concerns about proposals laid out by a future Italian coalition government.
The Five-Star Movement and League reached a coalition agreement to govern Italy on Friday, but outlined proposals that may hurt public finances, raising investor concerns.
Falling European bond yields and rising U.S. yields was cited by some analysts as the main driver of euro weakness, prompting traders to pile into the greenback.
“The fundamental driver of a rising US yield advantage relative to Bunds, coupled with concerns about government policy in Italy, look likely to remain in play,” Action Economics said.
The dollar remained close to a five-month high against a basket of major currencies on Friday.
4. Heavy Selling Pressure Hits Gold
Gold prices ended the week, nursing one of their biggest weekly losses for the year, as they struggled to claw back some of the losses sustained earlier in the week, when the 10-year treasury yield cracked above 3%.
The rise in geopolitical pressures, meanwhile, – as U.S.-China talks on trade appeared to sour and Kim Jong Un got cold feet about a meeting with the President Trump next month – failed to support safe-haven gold.
5. Bitcoin: ‘Consensus Pump’ Fails to Show
A fresh wave of selling hit bitcoin this week as traders expressed disappointment at the popular crypto’s failure to stage a rally following the annual Blockchain conference, consensus, which got underway earlier this week.
Bold claims by analysts in the run to the conference had spark hopes bitcoin would be able to stage a rally, bouncing back from a slump last week following renewed regulatory concerns.
“Bottom line: We expect bitcoin and cryptocurrencies to behave similarly to prior years and rally during Consensus,” Tom Lee of Fundstrat Global Advisors said in the run up to the conference.
New insights into the current crypto environment from market participants attending the conference were few and far between, providing little reason for investors to pile into bitcoin.
The turn in sentiment on cryptos this week compared to recent weeks, was characterised by a sharp retreat in the total cryptocurrency market cap, suggested that traders remained wary of backing cryptocurrencies.
The total market cap of cryptocurrencies fell to about $376 billion, at the time of writing, from about $400 billion last week.
Over the past seven days, Bitcoin fell 3.30% on the Bitfinex exchange, Ethereum was flat, while Ripple XRP fell 2.02% on the Poloniex exchange.