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 Trading on the day was choppy with oil dropping back after
Thursday's spike and the world's regional share and currency markets
mixed as investors assessed the wider global impact of the rising
tensions in the Middle East.
Asian shares dropped overnight but the pan-European FTSEurofirst
tip-toed higher as a 0.2 percent fall for Britain's FTSE was offset
by 0.6 and 0.1 percent gains on Germany's DAX and France's CAC 40.
They were given help as a rebound by the recently subdued dollar
pushed the euro back down towards $1.08 <EUR=>, but for the week the
FTSEurofirst 300 was down almost 2 percent, its worst run since
mid-December.
"I'm not surprised that European shares are fading their gains,"
said Gavin Friend, a strategist at National Australia Bank in
London, who said it was largely down to currency dynamics.
"The dollar is back stronger again today, but we seem to have gone
through the period where the dollar was rampaging through markets.
That brought all kinds of (U.S.) policymakers out of the woodwork
and now we are in more of two-way market."
Crude oil prices were lower due to the dollar's bounce and as
investors reassessed the potential impact of the escalating conflict
in Yemen, where Saudi Arabia and allies carried out air strikes on
Iranian-backed Houthi rebels on Thursday and Friday.
U.S. crude was down 2.3 percent at $50.33 a barrel after jumping 4.5
percent, while Brent was 2 percent lower at $58.02. [O/R]
The Saudi-led operation has not affected the oil facilities of major
Gulf producers, but the fear is the conflict could spread and
further unsettle the Middle East and disrupt oil shipments.
Goldman Sachs, however, said it expected the Yemen military action,
but also a potential nuclear deal with Iran that could lead to a
loosening of sanctions, to have little near-term impact on oil
supply.
PERIPHERY YIELDS RISE
Much of the run up in European markets has come as the European
Central Bank has launched a 1 trillion euro bond buying campaign.
But with the program already showing signs of lifting the euro zone
economy, talk is starting to emerge in markets about the bank
slowing its buying next year.
Italy , Spain and Portuguese bonds, which have been some of the
biggest beneficiaries of the ECB's stimulus, were heading for a
second week of rises in their yields despite mixed fortunes on
Friday.
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The dollar's recovery pushed it back up 119.40 yen having hit
a five-week trough of 118.33 on Thursday, while the euro's drop on
the day was putting it flat for the week.
While keeping a close eye on developments in the Arabian Peninsula,
the markets are also waiting for a speech by Federal Reserve Chair
Janet Yellen later in the session.
Yellen is scheduled to speak on monetary policy and her comments
will be closely analyzed after the Fed's dovish outlook last week
bruised the dollar.
Excluding the effect of last year's sales tax increase, data
released on Friday showed Japan's core consumer price index was flat
in February compared with a year ago.
It was the first time it has not risen in nearly two years, and will
be disappointing for a government that is seeking to end a long
phase of deflation. The yen showed little reaction.
Among the Asian equities, indexes in Hong Kong, South Korea,
Malaysia and Thailand suffered light losses.
Japan's Nikkei handed back earlier gains and slid 1.3 percent.
"Hedge funds and commodity trading advisors are seen taking profits
and unwinding their options positions before the first quarter
ends," said a senior trader at a foreign brokerage in Tokyo.
(Additional reporting by Shinichi Saoshiro; Editing by Alison
Williams)
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