European stocks were on the decline on Thursday due to the weak banking sector performance. EURUSD rate hit almost 4-month high of $ 1.1377 on Thursday. European banks tumbled 6.3% which raises concerns that funding conditions may worsen for some companies. The banking sector suffered on concerns that low interest rates make it barely profitable. Societe Generale fell 7.1% after its quarterly earnings fell short of expectations as the bank set aside 400mln euros on litigation. Rio Tinto posted an annual loss which pushed the miner’s shares 3.4% lower. On Friday European shares edged up paring yesterday’s losses. FTSEurofirst index rose 1.4% after the 3.7% loss on Thursday. Banking sector is in the black today with Commerzbank stocks rising 12% on positive Q4 earnings data.
Asian stocks were declining for a sixth session in a row on Friday dragged lower by weak data from European banks, concerns over the China’s slowdown and falling oil prices. Japan’s Nikkei index slumped 5.4% to a 15-month trough recording a weekly loss of 11.1%. Toyota Motor Corp and Honda Motor Co lost 6.8% and 5.5% respectively. Analysts at Nomura Securities calculated that “when dollar falls by 1 yen, it cuts Japan’s pretax earnings by 0.4-0.5% and pushes the Nikkei share average down by 400 points”. The yen continued strengthening with the USD JPY having hit 110.985 on Thursday. Japan’s markets were closed for a holiday on Thursday when US dollar sharply fell against the yen. The Japanese currency has already become almost 10% stronger since the Bank of Japan introduced negative interest rates and may strengthen further, according to experts.
Gold spot prices surged 4.1% to $1262.90 showing the record daily gain since September 2013 as investors rushed to safe-haven assets (gold, yen, government bonds) amid the slowdown of the world economy. This week spot gold prices have already advanced 5.5% while gold futures added almost 7%. The assets in the world’s major ETF SPDR Gold Trust increased 2% on Thursday.
WTI oil futures today edged up 4.7% to $ 27.44 a barrel on the news OPEC was considering oil production cuts, Brent oil prices are rising 6%. Nevertheless, both Brent and WTI are still to suffer 7% and 11% weekly losses respectively. According to the United Arab Emirates Oil Minister, cheap oil already forces its producers to limit oil output which will finally make the market rebalance.
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