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 The Swiss franc dipped after Thursday's surge, but it become the
first country to see its 10-year bond yields fall below zero and its
shares were again Europe's worst performers.
Stocks worldwide were limping toward a third week in the red, while
Wall Street [.N] was expected to decline for a sixth consecutive day
for the first time since mid-2012, the height of the euro zone
crisis.
Fragile risk appetite meant more record low yields for German and
other core euro zone government bonds, while Greek markets fell as
it emerged two of its banks had requested emergency ECB funding.
Commodity markets were for once an area of relative calm as oil
climbed to just below $49 a barrel, safe-haven gold cooled after its
best run in 11 months and copper settled after 7 percent plunge this
week.
"It's not panic but there has been volatility across the board, in
FX, in commodities, in bonds and in stocks this week," said Alvin
Tan, a strategist at Societe Generale.
"For a developed G10 currency, the 20 percent move in the Swiss
franc (this week) was extraordinary."
Thursday's shock Swiss decision to abandon the franc cap and bets
the European Central Bank will start buying government bonds with
new money as soon as next week combined to keep the euro pinned near
an 11-year low against the dollar.
It rose over 4.5 percent against the Swiss franc, however, after
plunging more than 18 percent on Thursday, the biggest daily loss in
its history.
Top ECB policymaker Benoit Coeure stoked quantitative easing
expectations further, saying the aim would be to anchor long-term
financing conditions and restore confidence in the bloc's inflation
target of just under 2 percent.
His comments came as it was confirmed euro zone prices fell last
month for the first time since 2009.
DIGGING FOR TREASURIES
U.S. traders were digesting results from one of Wall Street's
biggest names, Goldman Sachs, after the benchmark S&P 500 closed
below 2,000 points for the first time in a month on Thursday.
European stocks were staging something of a fightback [.EU] and were
only fractionally down on the day despite another 4.5 percent drop
in Swiss shares and a 2.5 percent fall in Athens.
Asia had ended the week on a gloomy note. MSCI's broadest index of
Asia-Pacific shares outside Japan shed 0.4 percent, while the yen's
recent rise helped push Japan's Nikkei stock average down 1.4
percent, and 1.9 percent lower for the week.
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Next week could be just as turbulent for markets.
The IMF is likely to follow the World Bank in downgrading economic
forecasts, while the ECB holds its critical meeting on QE on
Thursday. That will be followed on Sunday by cliff hanger Greek
elections that anti-austerity Syriza is forecast to win.
Also in the mix are a developing fourth-quarter corporate earnings
season, fears other commodities such as metals may follow the
spectacular collapse in oil, tensions over Russia and Ukraine, and
the monthly Chinese data dump.
As U.S. trading gathered momentum on Friday, the dollar was
continuing to recover from one-month lows against the yen, touching
116.70 as it headed for a fifth weekly rise against major
currencies.
Aiding the greenback, U.S. Treasury prices dipped and yields rose
from lows hit on Thursday as investors scrambled for safety.
Geopolitical and commodity market tensions continued to bubble under
the surface, however.
Crisis stricken Ukraine's central bank head Valeriia Gontareva
called for swift action from international lenders like the IMF to
overcome the country's "full-scale financial crisis" as she also
warned she may have to hike interest rates.
Helping offset the tensions for Russia, Brent crude oil futures rose
above $49 a barrel and U.S. crude also made gains as the
International Energy Agency said recent price slumps could reverse.
"How low the market's floor will be is anybody's guess. But the
sell-off is having an impact," the IEA said on Friday. "A price
recovery - barring any major disruption - may not be imminent, but
signs are mounting that the tide will turn."
(Additional reporting by Jemima Kelly; Editing by Catherine Evans)
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