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U.S. Stock Markets Dragged Down by Banking Sector, Geopolitical Concerns

James Hyerczyk

Trading was tight in the financial markets on Friday with dollar index posting an inside range, indicating investor indecision and impending volatility, and stocks giving back early gains amid geopolitical concerns. U.S. Treasury instruments also posted an inside range as investors couldn’t get a handle on investor sentiment.

Daily June U.S. Dollar Index

Forex

The U.S. Dollar closed higher on Friday, but posted an inside move, suggesting investors were still a little hesitant about playing the long side of the market amid tensions over Syria. The dollar did gain ground against the save haven currencies as concerns faded about a possible Western military in the war torn nation.

The lack of clarity over whether the U.S. was headed towards a trade war with China and the escalating risk of war in Syria helped underpin the dollar. Unlike the price action earlier in the week, traders acted as if they weren’t sure if a U.S.-led attack on Syria was imminent.

Daily USDJPY

The unwinding of safe haven trades hurt the Japanese Yen despite the news that S&P Global Ratings revised Japan’s outlook to ‘positive’ from ‘stable’ on the view that a stronger economy set the stage for fiscal improvement.

The Swiss Franc was also pressured by the unwinding of safe haven trades that were bought earlier in the week due to global tension.

U.S. Economic Data

The major economic report on Friday was Preliminary University of Michigan Consumer Sentiment. It fell to a reading of 97.8, down from 101.4 in March. Consensus forecast was for a reading of 100.5.

Daily June E-mini S&P 500 Index

U.S. Equity Markets

The major U.S. stock indexes fell on Friday, driven lower by the banking sector. The move, nonetheless, wasn’t enough to put a dent in the week’s solid gains. The indexes opened sharply higher on the back of strong earnings from some of the major banks, but the buying wasn’t strong enough to overcome the geopolitical tension overhanging the market.

Citigroup, Wells Fargo and J.P. Morgan Chase all reported quarterly earnings and revenue that surpassed analyst expectations. Bank shares initially traded higher before falling. However, analysts said the strong results were already priced in.

Daily June E-mini Dow Jones Industrial Average

U.S. Treasury Markets

U.S. Treasury markets were mixed on Friday as some instruments responded to the prospect of higher interest rates and others to geopolitical tensions related to a possible trade war and an escalation of military activity in Syria.

Short-term interest rates rose to their highest levels since the financial crisis, as investors bet on more Federal Reserve rate hikes with inflation making a comeback. The yield on the two-year Treasury note hit a high of 2.373 percent, its highest level since September 9, 2008. The yield on the benchmark 10-year Treasury note was largely unchanged at 2.828 percent, while the yield on the 30-year Treasury bond was also flat at 3.035 percent.

This article was originally posted on FX Empire

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