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Top 5 Things to Know in the Market on Friday

ForexFeb 09, 2018 11:36
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© Reuters. 5 key factors for the markets on Friday - Here are the top five things you need to know in financial markets on Friday, February 9:

1. U.S. Congress passes bill to end government shutdown

The U.S. Congress managed to pass a two-year budget agreement early Friday that ended a brief partial government shutdown that began at midnight when lawmakers missed a funding deadline.

The agreement will boost federal spending by almost $300 billion and suspend the debt ceiling for a year and was passed in a 240-186 House vote following an earlier approval by the Senate (71-28).

Since U.S. President Donald Trump had already promised to sign the bill, the measure will restore funding before most government workers arrive at their jobs and financial markets open.

2. Stocks set to rebound after record rout

This week has been a rough one for global stocks, their worst decline since 2011, with the selloff in the last U.S. session causing the Dow to chalk up its third loss of more than 500 points in the last five days, sending the blue-chip index on track to register its worst weekly decline since October 2008.

Both the Dow and S&P 500 have officially entered correction territory as both indices are off more than 10% since their January 26 highs.

Increases in Treasury yields on the back of strong economic data have been cited as a reason for capital rotation out of equities and into bonds.

For the moment, U.S. futures last pointed to a bounce at the open on Friday, with traders apparently breathing a sigh of relief. At 6:00AM ET (11:00GMT), the blue-chip Dow futures gained 128 points, or 0.53%, S&P 500 futures rose 19 points, or 0.17%, while the Nasdaq 100 futures traded up 45 points, or 0.72%.

Earlier, Asian stock markets felt the spread of panic, following in Wall Street’s footsteps. Of note, China’s Shanghai Composite tumbled 4% at the close, its largest decline in nearly two years, pulling off a 6% plunge since at the height of the Asian selloff. Meanwhile, Japan’s Nikkei 225 also ended with notable losses of 2.3%.

However, European shares managed to post more limited losses on Thursday, shaking off the sharper selloffs seen on Wall Street and Asia, even as U.S. futures pointed to a slight recovery.

3. U.S. 10-year Treasury yield creeps back towards key 3% level

The yield on 10-year Treasury notes on Friday crept back towards a four-year high on Friday after the U.S. Congress passed a roughly $300 billion spending bill to end the government shutdown.

Analysts have been concerned about the psychological 3% level for 10-year Treasuries, suggesting it could be a trigger for investors to move money out of equities and into the safe haven asset.

Experts have suggested that strong economic data has increased risk of inflation, prompting fears that the Federal Reserve would be forced to take a more aggressive stance in tightening monetary policy.

The 10-year yield was last up 1 basis point to 2.858% on Friday after earlier losses, moving back towards the nearly four-year high of 2.885% set on Monday.

4. Oil on track for weekly losses of more than 7% on output worries

The U.S. benchmark marked its sixth consecutive session of declines on Friday on was on track for weekly loss of around 7.5% as investors continued to worry that increased production would off-set the OPEC-led attempt to curb output and rebalance the market.

Iran announced plans to increase its production within the next four years by at least 700,000 barrels a day.

That added to a report from the U.S. Energy Information Administration (EIA) this week that revealed that U.S. crude production rose to a record high of 10.25 million barrels per day (bpd), placing its output beyond that of Saudi Arabia, the largest OPEC producer.

Later on Friday, market participants will have further input on U.S. shale production when Baker Hughes releases its most recent weekly rig count data.

U.S. crude oil futures lost 0.98% to $60.55 at 6:01AM ET (11:01GMT), while Brent oil fell 0.65% to $64.39.

5. Chinese inflation eases causing worry over loss of economic momentum

Annual consumer and producer price inflation in China both eased as expected in January, moving against fears of increasing price pressures in the likes of the U.S. or Europe.

The data causes some concern that the world’s second-largest economy may be slowly starting to lose some momentum, although experts warned that data may be distorted due to calendar issues with the start of the Lunar New Year on February 16.

Top 5 Things to Know in the Market on Friday

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