Investing.com – Top 5 things that rocked U.S. markets this week.
1. US Equity Markets Make Comeback as Volatility Retreats
The violent upswing in volatility that sent global markets tumbling last week abated, paving the way for US stocks to recover some of their losses.
Volatility as measured by the so-called fear index VIX fell below the 20 after rising to levels not seen since 2015 a week ago.
The recovery was made all the more the impressive as it came amid improving inflation, which Morgan Stanley said was one of the reasons that stocks had sold off last week.
Morgan Stanley said that investors were not worried by macro fundaments – which remains stronger for longer – but rather “the perceived rise in inflationary pressures and the accompanying rise in interest rates.”
Also supporting equities was a rise in shares of steel manufacturing after U.S. Commerce Department Friday recommended a 24% tariff on steel imports from all countries, and a 53% tariff on imports from 12 countries that constitute the majority of U.S. steel imports.
The Commerce Department also recommended a 7.7% tariff on all aluminum exports, or a 23.6% tariff on all products from China, Hong Kong, Russia, Venezuela and Vietnam.
The S&P 500 notched its best week since 2013 as it ended the week at 2,732.22.
2. WTI Crude Snaps Two Week Losing Streak
Crude oil prices shrugged off a week of mostly bearish reports, snapping a two-week losing streak.
Both OPEC and the International Energy Agency (IEA) claimed earlier this week that non-OPEC output, led by the US, was set to surge in the months ahead and could weighed on major oil producers’ efforts to restore rebalancing in the market.
Offsetting that somewhat, was weekly crude supply totals from the Energy Information Administration showing U.S. crude supplies rose less than expected. A slowdown in refinery activity as maintenance season gets underway, however, could see supply totals build as demand for crude falls.
On Friday U.S. crude futures rose 34 cents to settle at $61.68 a barrel.
3. Euro, Yen Pressured Vulnerable Dollar
The dollar ended Friday nursing heavy weekly losses pressured by sterling, euro and yen. Weakness in the dollar was somewhat surprising given a raft of upbeat economic data reported this week including a solid inflation report, lifting Fed rate hike expectations.
Some pointed to investor jitters concerning the U.S. deficit, which is forecast to climb near $1 trillion in 2019 following the announcement of infrastructure spending and large corporate tax cuts.
Others suggested, however, that diverging global monetary policy was supporting demand for euro and yen assets limiting advances in the greenback.
“The dollar sell off Wednesday in spite of higher Fed tightening probability reinforces our view that monetary policy divergence is raising the attractiveness of euro and yen assets to international investors,” Mizuho Bank said.
4. Gold Prices Posted Weekly Gain For First Time in 3 Weeks
A falling dollar helped gold prices avoid a third straight week of losses. The yellow metal traded within a roughly $50 price range this week, recovering from lows of about $1,316 an ounce to end the week at $1,349.70.
The bullish week for gold comes against the backdrop of falling demand as CFTC COT data showed money managers cut their long bets on gold for the third straight week.
5. Cryptos Rebound as Bitcoin Meets $10,000 Again, Litecoin Steals the Show
A report highlighting South Korea’s plan to pivot toward more ‘friendly’ approaches to regulate the crypto-industry rather than issue an outright ban appeared to be just what the crypto-doctor ordered, paving the way for fresh inflows into the industry.
The total cryptocurrency market cap rose to about $480 billion, at the time of writing, from $420 billion a week ago.
Rising inflows and limited outflows characterised earlier rallies in cryptocurrencies, so it was somewhat unsurprising to see bitcoin rise more than 16% over the past seven days.
Yet, Litecoin garnered all the attention after surging more than 40% over the past seven days. The rally came amid Litecoin’s announcement that it would launch a LitePay payments processor. Litecoin reportedly said that merchants in 41 countries will have access to the LitePay merchant payment processing.
Others, however, cited an upcoming split or “fork” in Litecoin, creating Litecoin Cash, as the more plausible reason. Investors piled into Litecoin on expectations of receiving free Litecoin Cash, which will be distributed, at the time of fork, to any user "hodling" Litecoin.