Quad Witching Arrives: Futures Steady, Stoxx 50 Erase 2016 Loss As Dollar Steadies
By Tyler Durden
Quad-witching Friday has arrived, which means that alongside thin, pre-holiday liquidity and a jumpy market, we expect to see sharp, volatile moves for the rest of the day, the first of which was just noted in Europe, where stocks moved from session lows to highs in the span of minutes, in the process sending the Euro Stoxx 50 index 0.8% higher and turning it positive on the year as it reached its highest level since December 2015. The broader Stoxx 600 remains still down 1.8% on the year. Of Europe’s indices, the IBEX, FTSE MIB, SMI are still down; while the FTSE 100, CAC 40 are up on the year and the German DAX just hit 2016 highs.
The dollar’s post-Federal Reserve rally steadied on Friday and European shares traded near 11-month highs. Having soared yesterday to its highest level in 14 years, following the Fed’s hawkish announcement, the dollar’s advance stalled as the dust settled on a new financial-market landscape created by the Federal Reserve’s shift to a tighter policy path. The greenback fell against the euro after touching the highest since 2003 on Thursday. The dollar index stood at 103.000 after hitting a 14-year high of 103.560 on Thursday, when it gained 1.2 percent to record its biggest daily percentage gain in nearly six months.
The yield on 10-year Treasuries dropped from the highest since 2014, snapping a six-day streak higher underpinned by the Fed’s more hawkish outlook for interest-rate increases next year. Gold trimmed its sixth weekly decline, and copper fell.
The relatively muted moves – so far – mark a step back after a dramatic week in which the U.S. central bank unveiled its outlook for an accelerated series of rate increases in 2017. That steeper path comes as Donald Trump prepares to unveil what the market expects will be a huge fiscal stimulus, that may fuel fast growth and inflation in the world’s biggest economy. Volumes are expected to thin in coming weeks as traders close positions before the December holiday season and end of the year.
“Today’s move is a minor correction,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “We could easily head a bit lower until the end of the year, but all the arguments are on the dollar’s side. Interest rate expectations in the U.S. show the Fed has regained most of its credibility and the market is now convinced there will be an aggressive rate-hiking cycle.”
Asian stocks were tepid, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.1 percent, after falling 1.8 percent on Thursday. Japanese shares rose 0.7% after scaling a one-year peak on the export prospects from a weaker yen. World stocks as measured by the MSCI world equity index, which tracks shares in 46 countries, were up 0.1 percent.
Cited by Reuters, analysts and traders said that the European stock market’s outlook remained broadly positive in the medium term, with major stock indexes seen setting fresh highs. “Stocks are continuing …read more
Source: Quad Witching Arrives: Futures Steady, Stoxx 50 Erase 2016 Loss As Dollar Steadies
