World shares and the dollar zig-zagged higher on Friday, as hopes for economic recovery and the week’s easing of global bond market yields helped lift the mood.
As the last full week of a hectic first quarter drew to a close, traders were still watching the world’s most costly traffic jam build up in the Suez canal and the global COVID-19 case count rising again.
Asian stocks had clawed off a three-month low overnight as Chinese markets rebounded from their latest U.S. relationship worries while a near 3% jump in commodity stocks and weak euro put Europe on course for a fourth straight weekly rise.
Euro zone bond yields edged up but benchmark German bonds were set for their best weekly performance in 3-1/2 months as the bloc’s coronavirus woes supported its safe-haven assets.
The euro’s struggles are part of that too but the dollar bulls are on the charge again with the U.S. vaccine programme ramping up. The greenback’s rise on Friday meant it had almost clawed back all its post-U.S. election fall. Emerging markets currencies have had their worst run of the year this week.
“We left 2020 with the validation of the consensus view the dollar would weaken,” said the chief investment officer at Indosuez Wealth Management, Vincent Manuel.
“We have woken up in 2021 facing the reality that the U.S. is growing much quicker than Europe... so we have a massive divergence”.
Weekly money flow data from Bank of America showed global investors have been darting for safety amid this week’s drama. They pumped $45.6 billion into cash funds, the largest since April 2020 when COVID-19 was spreading like wildfire.
The end of the week news flow has been slightly more friendly though.
U.S. Labor Department data on Thursday showed claims for unemployment benefits dropped to a one-year low last week, a sign that the U.S. economy is on the verge of stronger growth as the public health situation improves.
U.S. President Joe Biden’s first formal news conference was a boost too as he said he would double his vaccination rollout plan after reaching the previous goal of 100 million shots 42 days ahead of schedule.
Turkey’s markets continued to settle after the lira’s 9% slump triggered by President Tayyip Erdogan’s latest central bank chief sacking.
Bluechip Chinese stocks rebounded more than 2% too after a three-day losing streak, which, like emerging market shares generally, had left them at the lowest level of the year.
“All the sanctions (on China) so far have been largely symbolic and should have little economic impact. But the Sino-U.S. confrontation is affecting market sentiment. It could take some time for them to come to any compromise,” said Yasutada Suzuki, head of emerging market investment at Sumitomo Mitsui Bank.
The dollar also rose to a new nine-month high on the Japanese yen of 109.44 yen. The euro licked its wounds at $1.1794 after falling to a four-month low on Thursday.
The ongoing efforts to dislodge a beached tanker in the Suez canal saw oil prices rebound a tad from a 4% drop on Thursday, though they are on course for their third straight week of losses on worries about further reduction in demand.
In addition to Europe, major developing economies such as Brazil and India are also struggling with a resurgence in COVID-19 cases.
Brent was at $62.62, up 1.08%, U.S. crude was last up 1.33% at $59.35 per barrel, gold was flat and copper, though more than 1% higher on the day, was still in its $8,600 - $9,200 a tonne recent range.
Reeling from the blockage in the Suez, shipping rates for oil product tankers have nearly doubled this week, and several vessels were diverted away from the vital waterway.
Reporting by Marc Jones; Editing by Andrew Cawthorne