Stocks up on U.S. bank
hopes, dollar and yields slip
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[January 13, 2017]
By Jamie McGeever
(Reuters) - European and U.S. stocks looked to end a sluggish week on a
high note on Friday, while the dollar headed for its biggest weekly
decline in two months and U.S. bond yields eyed their longest run of
weekly declines since July.
Investors largely shrugged off the biggest fall in Chinese exports since
2009, and resumed the "Trump" trades across equity markets based on
higher growth expectations that had tailed off this week, with auto and
bank shares leading the way.
Bank of America Merrill Lynch <BAC.N> kicked off the U.S. bank earning
season, reporting a 47 percent rise in fourth quarter profit thanks to
an upswing in market activity following the election of Donald Trump on
JP Morgan Chase <JPM.N> and Wells Fargo <WFC.N> report Q4 results later
in the day.
"U.S. bank earnings are going to be a big attraction," said Jim Reid,
strategist at Deutsche Bank. "After the Trump trades disappointment this
week ... this will likely impact the overall direction of markets."
Bank stocks led the charge in European trading, rising 1 percent <.SX7P>
to lift the FTSEuroFirst 300 <.FTEU3> 0.6 percent. The index of euro
zone bank stocks was up nearly 2 percent <.SX7E>.
The broader FTSEurofirst index was still down slightly on the week
though, its first weekly fall in six.
Shares in Fiat Chrysler Automobiles <FCHA.MI> rose as much as 6 percent,
recouping some of the previous session's 16 percent slump triggered by
the U.S. Environmental Protection Agency's (EPA) accusations that the
car maker illegally masked excess diesel emissions.
Germany's DAX was up 0.6 percent and Britain's FTSE 100 rose 0.4
percent, on course for its 12th record high close and 14th consecutive
U.S. futures pointed to a slightly higher open on Wall Street.
Thursday's slip into the red marked yet another failed attempt to lift
the Dow Jones through the magical 20,000 points barrier.
Wall Street was chilled by Trump's failure to address economic policy
plans this week at his first news conference since winning the Nov. 8
election, and growing fears that his proposed protectionist policies
will choke global trade.
Chinese trade data on Friday poured oil onto those flames. December
exports fell by 6.1 percent from a year earlier, meaning the overall
fall in exports last year was the biggest since the depths of the
financial crisis in 2009.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1
percent, after rising to its highest levels since late October in the
previous session. It was up 1.8 percent for the week.
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The German share price index DAX board is reflected in a glass at
the stock exchange in Frankfurt, Germany, December 8, 2016.
Japan's Nikkei stock index finished up 0.8 percent, though it still ended
the week down 0.9 percent.
BOND YIELD RETRACEMENT
The symbiotic dance between the dollar and U.S. Treasury bond yields held firm
on Friday. Both headed lower to end a week which has seen the dollar fall almost
1 percent and yields extend their longest downturn since last summer.
The 10-year yield slipped to 2.35 percent, down more than 5 basis points on the
week and around 30 bps since the Federal Reserve raised interest rates in
The dollar wallowed around five-week lows against a currency basket at 101.23,
and down 0.9 percent for the week.
The euro rose a third of a percent to $1.0645, up three cents from last week's
14-year low of $1.0340 and poised to gain 1 percent for the week. The dollar was
steady against the yen at 114.70 yen.
dollar index had scaled 14-year peaks this month, on speculation that Trump's
policies would spur growth and inflation, and spur the Fed to raise interest
rates at a faster pace than previously expected.
But doubts have crept in.
"Bond markets continue to retrace from the yield highs set in the middle of last
month," RBC Capital markets rates strategists wrote in a note to clients on
"The latest move (is) seen as a typical 'buy-the-rumor-sell-the-fact' reaction
as Donald Trump's pre-inauguration press conference proved to be a
disappointment in terms of forthcoming growth-boosting policies," they said.
In commodity markets, Brent crude and U.S. crude both fell 1 percent to $55.46 a
barrel and $52.47, respectively. Spot gold ticked higher to $1,197.60 an ounce,
having risen overnight to a seven-week high above $1,200. [GOL/]
(Reporting by Jamie McGeever; Editing by Mark Heinrich)
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