Stocks Stabilize While Caution Remains; Market wrap

Global equities showed signs of stability while other assets indicated caution remains at the end of a turbulent week in which investors faced political crises in Washington and Brazil.

Japan’s Topix rose even as the yen headed for its strongest week in a month. Stocks in Hong Kong and Jakarta also climbed, while Australian shares capped their worst week since November. Gold resumed gains after briefly halting a five-day rally, while the dollar fell as emerging-market currencies rebounded. Brazil’s real tumbled Thursday amid calls for the country’s leader to resign over an alleged cover-up.

Equity volatility retreated and the S&P 500 Index clawed back part of the biggest selloff in eight months as U.S. President Donald Trump’s administration sought to move past controversies surrounding Russia that have threatened to ensnare its plans for tax cuts and infrastructure spending. Risk sentiment was also helped by better-than-expected U.S. jobless claims and regional manufacturing data.

Despite the rebound in the U.S., investors remain on alert. Wall Street has become more sensitive to Washington headlines as concerns grow over the strength of the global economy at a time when the Federal Reserve is considering further rate increases. The political upheavals were seen by some traders as a catalyst after global shares traded at an all-time high as recently as Tuesday.

“It’s too early to assume yesterday was a one-day wonder,” Ric Spooner, a market strategist at CMC Markets, wrote in a note. “Markets have clearly decided that the U.S. political situation has the potential to knock stock valuations off their relatively high perch.”

The crisis in Brazil added another layer of worries for investors. President Michel Temer has defied calls for him to step down, saying a Supreme Court probe will debunk allegations he participated in a cover-up. Meanwhile, geopolitics remained in the spotlight, amid reports that the U.S. Navy is moving a second aircraft carrier to the Korean peninsula and that Chinese jets intercepted a U.S. Air Force plane.

What investors will be watching:

Federal Reserve Bank of St. Louis President James Bullard speaks to the Association for Corporate Growth at Washington University’s Knight Center in St. Louis.

Trump’s first foreign trip as president will be to Riyadh on Saturday, at the invitation of Saudi King Salman bin Abdulaziz. After Saudi Arabia, Trump visits Tel Aviv and Rome before heading to a NATO summit in Brussels and the G-7 meeting in Sicily.

Here are the major moves in the markets:

Stocks

The MSCI Asia Pacific Index rose less than 0.1 percent as of 3:44 p.m. in Tokyo. Japan’s Topix index climbed 0.3 percent, after sliding 1.3 percent on Thursday. The gauge lost 1.3 percent for the week.

Australia’s S&P/ASX 200 Index fell 0.2 percent and South Korea’s Kospi was up 0.1 percent. The Hang Seng Index rose 0.3 percent and the Shanghai Composite slipped 0.1 percent.

S&P 500 futures were up less than 0.1 percent. The benchmark index rose 0.4 percent on Thursday after plunging 1.8 percent in the previous session, its worst day since Sept. 9.

Contracts on the Euro Stoxx 50 climbed 0.4 percent. The Stoxx Europe 600 Index declined 0.5 percent on Thursday, paring a drop that reached 1.2 percent.

Brazil’s Ibovespa Index tumbled 8.8 percent on Thursday, the most since October 2008, as political crisis returned to the country after last year’s impeachment process.

A Japan-traded ETF tracking Brazil’s Ibovespa Index dropped 6.5 percent after an even larger decline on Thursday, closing at the lowest level of the year.

Currencies

The Bloomberg Dollar Spot Index fell 0.1 percent after increasing 0.3 percent Thursday, reversing some of the selloff that took it to its lowest level since the U.S. election. The gauge is 1.1 percent lower for the week.

The yen rose 0.2 percent to 111.26 per dollar after falling 0.6 percent on Thursday. The currency is up 1.9 percent for the week, its strongest performance in a month.

Emerging-market currencies rebounded. The South African rand climbed 0.8 percent after tumbling 2.6 percent over the previous two sessions. The Turkish lira gained 0.6, after a 1.6 percent drop on Thursday.

Bonds

The yield on 10-year Treasuries climbed one basis point to 2.24 percent. It ended Thursday flat after earlier sliding to as low as 2.18 percent.

Commodities

Gold rose 0.3 percent to $1,251.26 an ounce after it fell 1.1 percent on Thursday to reverse part of its five-day rally. The metal is up 1.9 percent this week.

West Texas crude rose 0.6 percent to $49.64, as OPEC members supported Saudi Arabian and Russian pledges to extend supply cuts. Oil is up 3.8 percent for the past five days, its biggest weekly gain since the end of March.

Source: Bloomberg