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Aug 17, 2018

EU FX I Dollar retreats as prospect of China-U.S. trade talks soothe nerves I Currencies

Dan Kitwood | Getty Images
The dollar fell against a basket of peers on Friday, amid lower demand for the safe-haven greenback, as traders hoped next week's trade talks between the United States and China would ease tensions between the two countries.
Easing worries over the fallout from the Turkish lira's recent slide also helped strengthen the euro against the dollar.
The dollar index, which measures the greenback against a basket of six other currencies, was down 0.52 percent at 96.15, on pace for its third straight day of declines. The index remains just shy of the more than 13-month high of 96.984 hit on Wednesday.
"There was considerable risk aversion through the early part of the week with fears of Turkish contagion weighing on risk assets and that seems to have reversed somewhat here," said Karl Schamotta, a strategist at Cambridge Global Payments in Toronto.
A plunge by the Turkish lira and concerns over China's economic health hit emerging market currencies this week, boosting the dollar.
On Friday, the Turkish lira snapped a three-day rebound, sliding more than 5 percent against the dollar on worries about the threat of more U.S. economic sanctions unless Turkey hands over detained American evangelical pastor Andrew Brunson.
Next week's lower-level trade talks between China and the United States offer some hope that the two countries will find a way to head off a full-blown trade war.
"Although the chances of a breakthrough deal from lower-level talks are seen as unlikely, the meeting could be a positive step towards easing trade tensions between the worlds two largest economies," Lukman Otunuga, research analyst at futures brokerage FXTM in London, said in a note.
The euro rebounded from a more than 13-month low touched earlier this week and was 0.52 percent higher at $1.1435.
The common currency came under pressure in recent days as investors fretted about euro zone bank exposure to Turkey.
The Japanese yen and the Swiss Franc, which tend to rise in times of geopolitical and financial tensions, were higher on the day.
"There has been a flight to safety through the week that lifted both these currencies up and is keeping both of them stable," said Schamotta.
The Canadian dollar gained against its U.S. counterpart after the country's annual inflation rate accelerated by more than expected, increasing prospects that the Bank of Canada might raise interest rates next month.

US Bonds & Fixed Income Report: Pare slide after report Trump and Xi hope to discuss trade I CNBC

Alexandra Gibbs

U.S. government debt yields curbed their decline Friday on headlines that U.S. and Chinese representatives are working to develop a plan to end the ongoing trade dispute between the two nations.
The Wall Street Journal also reported that the talks would culminate in a meeting bet President Donald Trump and Chinese leader Xi Jinping.
The yield on the benchmark 10-year Treasury note was lower at around 2.864 percent at 2:28 p.m. ET, while the yield on the 30-year Treasury bond was in the red at 3.02 percent. Bond yields move inversely to prices.
As another week winds down, investors in the bond market will be gearing up for the final batch of economic data for this week, while keeping an eye on the political sphere.
At 10 a.m. ET, consumer sentiment for August is scheduled to come out, along with leading economic indicators and the Advance Quarterly Services Report, that measures the performance of the U.S. service economy, for the second quarter. No auctions by the U.S. Treasury are expected to take place however.
Switching focus, investor sentiment around the globe appears to be relatively upbeat on Friday, following positive trade developments between the U.S. and China.
On Thursday, National Economic Council Director Larry Kudlow confirmed to CNBC media reports that China and the U.S. would hold a fresh round of trade discussions later on this month. Consequently, investors have shown optimism on the back of the news, that two of the world's largest economies could potentially resolve their differences in the ongoing trade dispute.
While China has said that it welcomes dialogue between the two countries, it did however caution that it wouldn't consent to any unilateral actions concerning trade with the States. The move comes after months of rising tensions between both the economies, where each country has retaliated with counter-measures, after the other nation inflicted a new amount of levies on goods.
Concern in markets has risen as of late, as investors worry that an escalation in trade fears could trigger an economic slowdown worldwide and lower corporate profits.
Elsewhere, investors will be keeping a close eye on the moves in the Turkish lira, after it tumbled in recent trading sessions. Markets have been jittery of late over concerns surrounding the Turkish president's control of the economy and U.S. leader Donald Trump saying last week that he was in support of doubling metal tariffs on the country.
While no speeches by the U.S. Federal Reserve are scheduled for today, investors will be gearing up for a special central banking event next week: the Economic Symposium at Jackson Hole, Wyoming which will take place from next Thursday to Saturday.
This year's symposium will be on the topic of changing market structure and the implications for monetary policy going forward.

Oil Price at Close Report : Oil rises, but posts weekly loss on concerns over trade row I CNBC.


Oil pumpjacks in silhouette at sunset.
Oil pumpjacks in silhouette at sunset.
Crude prices edged higher on Friday, but posted yet another weekly decline on worries that oversupply would weigh on the U.S. market and that trade disputes and slowing global economic growth would slow demand for oil.
U.S. crude was on track for its seventh consecutive weekly decline and global benchmark Brent was set to drop for a third week.
"One of the biggest concerns out there is that China's demand numbers are coming down if China's GDP growth is slowing," said Tariq Zahir, managing member at Tyche Capital in New York.
U.S. West Texas Intermediate (WTI) crude futures ended Friday's session 45 cents higher at $65.91 a barrel, after touching a session high of $66.39 earlier. For the week, U.S. crude was down 2.5 percent, marking its longest losing streak in three years.
Brent crude oil futures were up 52 cents at $71.95 a barrel by 2:25 p.m. ET, after rising over $1 to hit a high of $72.49 a barrel. Brent was heading for a more than 1 percent weekly loss.
Traders said the main drags on prices were the darkening economic outlook due to trade tensions between the United States and China, and weakening currencies in emerging economies that are weighing on growth and fuel consumption.
Friday's pull back from session highs came on mounting worries that U.S. crude inventories would post another consecutive gain, said Bob Yawger, director of futures at Mizuho Americas.
U.S. government data this week showed a large build up in crude inventories, with production also increasing.
"Investors remain cautious as Wednesday's surprise gain in U.S. stockpiles remained fresh in their minds," ANZ bank said on Friday.
The number of U.S. oil drilling rigs, an indicator of future production, were unchanged in the week at 869 rigs, according to a weekly report from energy company Baker Hughes on Friday. Last week, drillers added 10 oil rigs, the biggest rise since May.
Another major drag on prices was the darkening economic outlook on the back of trade tensions between the United States and China, and weakening emerging market currencies that are weighing on growth and fuel consumption, traders and analysts said.
U.S. investment bank Jefferies said there was a "lack of demand" for crude oil and refined products from emerging markets, while Singapore's DBS bank said that Chinese data showed a "steady decline" in activity and that "the economy is facing added headwinds due to rising trade tensions".
Japan's MUFG Bank, meanwhile, said that the weakening Turkish lira will constrain further growth in gasoline and diesel demand this year.
"Although emerging market contagion and China slowdown fears seem somewhat overstated, neither fundamental nor sentiment should provide support for higher commodity prices," Julius Baer Head of Macro and Commodity Research Norbert Rücker said.
Furthermore, just as demand seems to be slowing, supply looks to be rising, increasing the drag on markets.
Despite the bearish factors, analysts said prices were prevented from falling further because of U.S. sanctions against Iran, which target the financial sector from August and will include petroleum exports from November.
"Iranian crude exports were still near 2 million barrels per day (bpd) in July and will likely begin to fall dramatically in August with financial sanctions taking effect. With oil export sanctions now three months out, we expect exports to fall by more than 500,000 bpd by the end of 3Q," Jefferies said.

Wall Street at Close Report: Dow rises more than 100 points after report Trump and Xi hope to discuss trade in November I CNBC

Fred Imbert, Alexandra Gibbs

The Dow Jones Industrial Average jumped on Friday after a report said President Donald Trump and Chinese leader Xi Jinping hope to discuss U.S.-China trade in November.
The 30-stock index rose 110 points after The Wall Street Journal said U.S. and Chinese officials are working on a road map for the meeting to take place. The S&P 500 also rose 0.3 percent, while the Nasdaq Composite erased earlier losses to close 0.1 percent higher.
"If you take the possibility of a trade war with China off the table for a few months that allows the market to work its way higher," said Ed Keon, chief investment strategist at QMA. "This has been one of the market's biggest worries. If you put it on the back burner, it's a good thing."
Friday's report comes after National Economic Council Director Larry Kudlow confirmed on Thursday earlier reports to CNBC which stated that China and the U.S. would hold a fresh round of trade discussions later on this month.
China and the U.S. have been engaged in a trade spat recently with both countries slapping tariffs on several of their imports. The ongoing trade tensions have left investors fearful than any escalation could results in a global economic slowdown or a hit to corporate profits.
A trader works on the floor of the New York Stock Exchange. Michael Nagle | Bloomberg | Getty Images
A trader works on the floor of the New York Stock Exchange.
Dubravko Lakos-Bujas, J.P. Morgan's head of U.S. equity strategy, told CNBC's "Halftime Report" on Friday that he remains confident the S&P 500 will reach his year-end target of 3,000.
"The only thing that's basically keeping us from getting there at this point is the trade and the geopolitical risks," Lakos-Bujas said. "If you get any sort of softer rhetoric there ... I think the market could actually move higher by a few percentage points easily. And relatively quickly."
U.S. and Chinese officials are scheduled to have "mid-level talks" in Washington next week.
It has been a turbulent week for the market as Turkey's ongoing geopolitical and economic issues weighed against positive headlines on U.S.-Chinese trade negotiations.
The Dow recorded triple-digit moves every day this week. The Cboe Volatility index, widely considered the best fear gauge on Wall Street, hit its highest level in more than a month earlier this week.

"I think the market is trying to digest everything that's going on in Turkey. On top of that, you now have some negotiations between the U.S. and China," said Daniel Deming, managing director at KKM Financial. "I think the market is trying to grapple with all that."
Turkey's currency, the lira, hit an all-time low against the dollar on Monday. The currency bounced off those lows but then resumed its decline on Friday amid fears of additional sanctions from Washington. The U.S. warned Turkey it would impose more levies if American pastor Andrew Brunson is not released; he has been detained in Turkey since 2016.
The threats sent the lira down by about 3.7 percent.
The lira has also been under pressure because of Turkish President Recep Tayyip Erdogan's tight grip on the country's central bank. Erdogan has said he wants interest rates to remain low to keep Turkey's growth rate high, despite surging inflation in the country.
"With inflation running quasi out of control, the central bank won't raise rates high enough to choke it off, and so the lira falls, and it will continue to fall until that occurs," said Tom Essaye, founder of The Sevens Report, in a note. "That's because the central bank has become a political arm of the prime minister, as have many other parts of the Turkish government."
"And, therein lies the problem. At the heart of the Turkish tragedy is the fear that Erdogan has become a quasi-dictator, enforcing his political will on bodies best left independent (e.g. central bank)," said Essaye.
Shares of Applied Materials dropped more than 7.5 percent after the company issued weaker--than-expected guidance for its fiscal fourth quarter. Meanwhile, Nvidia fell 4.9 percent after its revenue forecast disappointed investors. These declines brought down the VanEck Vectors Semiconductor exchange-traded fund (SMH) by 0.7 percent.
—CNBC's Patti Domm and Tom Franck contributed to this report.

Gold Price at Close Report: Gold gains: but set for biggest weekly loss in over a year I CNBC

Gold Source: World Gold Council
Gold recovered some ground on Friday as a weakening U.S. dollar relieved pressure on prices, but the precious metal remained near 19-month lows and looked poised for its biggest weekly drop since May 2017.
Spot gold added 0.31 percent to $1,177.21 ounce, but was down 2.7 percent this week in its sixth consecutive weekly loss. On Thursday, it touched $1,159.96, the lowest since January 2017.
U.S. gold futures for December delivery settled up 20 cents, or 0.02 percent, at $1,184.20 per ounce. "The markets are very oversold and the dollar is overbought," said John Caruso of RJO Futures. "It looks like some of the shorts are trying to book some profits."
From a 13-month high on Wednesday against a basket of six major currencies, the dollar has weakened against the currencies of key gold markets, the euro zone and China, helping gold regain its footing, said ABN AMRO analyst Georgette Boele.
"I expect the dollar to peak in the coming weeks ... Gold should bottom out here," she said.
Gold has tumbled 14 percent from its April high as a rally in the greenback made dollar-priced bullion more expensive for buyers using other currencies.
Investors seeking a safe place to store assets amid trade disputes and a Turkish currency crisis have preferred the dollar to gold, undermining the reputation of bullion as a safe haven.
But news of planned U.S.-China trade talks and a partial recovery of Turkey's lira have steadied investors' nerves slightly.
Bets on lower prices on the Comex exchange continue to build and now outweigh bets on higher prices by the largest quantity ever recorded.
Pressure from speculators may ease, however, said Boele.
"Everyone who wants to be short is short, and if you are still long and have held your position all the way down, why would you sell here?"
In technicals, Fibonacci resistance was at $1,185.30 with support at the January 2017 low of $1,146.20, analysts at ScotiaMocatta said, adding that gold would likely fall further.
Meanwhile, silver gained 0.3 percent to $14.66 an ounce, but was down more than 4 percent on the week, the biggest weekly loss since February. On Thursday it touched its lowest since February 2016.
Platinum increased 0.2 percent to $778.40 an ounce and was set for its biggest weekly drop since November 2015 of about 6 percent. It hit a 10-year low on Thursday.
Palladium gained 1.1 percent to $898.90 per ounce, but was down 1.4 percent this week having struck a one-year low.

European Markets at Close Report: European markets lower amid geopolitical uncertainty; Kaz Minerals tumbles 13% I CNBC

Sam Meredith

European stocks closed lower on Friday afternoon, as Turkey's ongoing currency crisis appeared to keep investors wary of taking on riskier assets.
FTSE FTSE 7558.59 2.21 0.03% 621298450
DAX DAX 12210.55 -26.62 -0.22% 88699290
CAC CAC 5344.93 -4.09 -0.08% 66173690
IBEX 35 --- --- --- --- --- ---
The pan-European Stoxx 600 closed provisionally down 0.56 percent with almost all sectors and major bourses in negative territory.
Europe's technology stocks were among the worst performers, down exactly 2 percent following a weak forecast from U.S. company Applied Materials. The world's largest supplier of equipment used to make chips said late Thursday that it expected current-quarter profit to fall below Wall Street expectations, fueling fears a two-year chip boom could be coming to an end. Silicon wafer group Siltronic slipped more than 4 percent on Friday.
Looking at individual stocks, Danish shipping company A.P. Moller-Maersk said Friday it would spin off its offshore drilling operation and list in Copenhagen next year as it focuses entirely on transport and logistics. Shares of the company were over 1.83 percent higher on the news.
Meanwhile, Italian toll-road operator Autostrade per l'Italia is expected to hold an extraordinary board meeting next week to discuss the Genoa bridge disaster, Reuters reported, citing an unnamed source. The company, 88 percent owned by Atlantia, has become embroiled in a political dispute over its freeway concessions after the Morandi bridge collapsed on Tuesday, killing at least 39 people. Shares of Atlantia were up 5.68 percent Friday, after falling more than 22 percent in the previous session.

On the aviation front, shares of Air France slumped 3.09 percent after the airline confirmed Ben Smith as the new chief executive officer. On Thursday, Air France-KLM named Air Canada executive as its new boss — the first foreign CEO to take over company's reigns.
In the U.S. Friday, stocks initially opened lower but the Dow and S&P 500 subsequently turned positive.

Turkey troubles

Market focus is largely attuned to Turkey's ongoing currency crisis, with the lira staging a dramatic fall against the dollar earlier this week, sparking fears of contagion and a sell-off in emerging markets. However, the lira has since extended gains from its all-time record low, trading at 6.0544 at around 4:40 p.m. London time.
On Friday, Turkey's state-run news agency reported that a higher Turkish court has also rejected an appeal for the release of American pastor Andrew Brunson.
Meanwhile, news the U.S. and China are scheduled to hold their first set of trade talks since June next week appeared to boost market sentiment.
Back in Europe, annual inflation in the 19 countries sharing the single currency increased to 2.1 percent in July, data showed Friday, confirming the rate was above the European Central Bank's (ECB) target. The inflation rate could be perceived as good news by ECB policymakers, who are looking to end a bond purchasing program by the end of the year and possibly raise interest rates next year.