The euro enjoyed a banner week while stocks around the world tumbled. German & Australian bonds surprised investors with valiant comebacks while most currencies held their ground. Commodities were mixed, with crude taking losses while gold is on the rise. American equities took the back seat as investors hold their breath over the Fed’s next annual bank stress test. This will determine whether lenders can increase dividends & share repurchases, potentially making it a landmark decision. It’s been another interesting week, let’s dive into the details.
Euro Rebounds as Global Stocks Retreat
The euro shocked investors as it reached a one year high. These are the highest numbers it has managed to pull off since last year’s Brexit vote. Against all odds, the flailing currency surged 1.4% on Tuesday. This allowed it to briefly touch $1.1379, reaching its highest level since June 2016.
This surprise comeback was welcome news to investors, but that didn’t stop the currency from lightly retreating. Just as experts finished shaking their heads, the euro settled at $1.1359 with a meager 0.2% increase. It’s still on track for another potential windfall, so investors are keeping a close eye on this unpredictable currency.
While the euro basked in its fresh momentum, most currencies remained flat. The Bloomberg Dollar Spot Index rose 0.1%, leaving little changed after suffering a 6% loss last session. The yen held steady at 112.35 per dollar after steadily weakening during the last two weeks.
Even though most currencies are little changed, another easily forgotten currency decided to join the euro’s comeback. The Canadian dollar jumped 0.3%, which added to its 0.4% comeback last Tuesday. These shocking rallies were fueled by the Bank of Canada’s interest rate cuts. They have been commemorated as being “extraordinarily low”, & this optimism is rippling through the Canadian economy.
As currencies remained strong, stocks continued to retreat. A full-fledged technology sell-off is in motion, & it’s effects have been felt around the globe. Technology shares tumbled by 1.2%, pushing the Stoxx Europe 600 Index 0.7% lower. SAP also retreated 1.7% while futures on the S&P 500 Index lost 0.1%. While this seemed manageable, the underlying gauge dropped 0.8%.
Out of all the stocks, Asia got hit the hardest as technology shares continue to fall. Even a bold rally of Japanese banks couldn’t upset this slide, with Japan’s Topix losing 0.3%. Samsung lost 1.2%, forcing South Korea’s Kospi index down 0.4%. Regulatory investigation of key Chinese companies caused small-cap stocks to plunge. In total the Hang Seng lost 0.6%, while Tencent Holdings Ltd suffered a 1.7% slide. This sentiment echoed throughout China, causing the Shanghai Composite to drop 0.6%. It was a drastic change from the bullish mentality a few weeks ago, but that’s nothing new in Asia.
Commodities were mixed as fears of an expanding global oil supply stopped gains dead in its tracks. Experts predict that new oil suppliers are overshadowing Russia’s production cuts, which caused panic. In total WTI futures fell 0.9%, leaving crude at $43.85 a barrel. This was a sharp contrast to the 4% gain enjoyed in the last 4 sessions. While crude took a loss, gold rose 0.3%. This left it at $1,250.33 an ounce on its second day of the rebound.
At the end of the week, investors are still on edge. Things may be on track with most currencies, but growing concerns over this tech sell-off remain pressing. If predictions are true, the market should balance itself out. This will be welcome news for Asian investors, but it won’t be helpful until it comes to fruition.