Stocks and bond yields rebounded on Friday, led by a strong rise in oil prices, but were still on track to end lower over the course of a bruising and volatile week that’s been marked by the Japanese yen’s surge against the dollar.
Europe’s FTSEurofirst 300 .FTEU3 was up 0.8 percent, lifted by energy and resources stocks, but will still likely notch up its fourth straight weekly decline.
That would be its longest losing streak since October 2014.
The dollar briefly traded above 109.00 yen JPY=, recovering from its first break below 108.00 since October 2014 the previous day.
“The recovery in risk appetite that has seen funds flow into equities can almost exclusively be laid at the feet of a rebound in the oil price,” said Jasper Lawler, market analyst at CMC Markets in London.
“This puts the recovery on risky ground given the absence of confidence that producers can reach agreement at next week’s meeting in Doha,” he said, referring to the April 17 meeting of oil producers that could yield a production freeze and put a floor under the oil price.
The STOXX Europe Oil and Gas .SXEP index was up around 2 percent, the top sectoral gainer, tracking the rise in crude prices.
The FTSEurofirst, DAX and CAC are still down on the week, however, although Britain’s FTSE is on course to eke out a modest gain.
Earlier in Asia MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended flat on the day, closing out the week down 1.2 percent.
Japan’s Nikkei .N225 erased earlier losses after Finance Minister Taro Aso said the government would take steps to counter “one-sided” moves in the yen in either direction.
The yen’s JPY= strength is regarded as negative for Japan’s big exporting firms, and after earlier falling to near two-month lows, the Nikkei ended the session up 0.5 percent, leaving it with losses of 2.1 percent for the week.
U.S. futures pointed to a rise of around 0.5 percent at the open on Wall Street ESc1. The S&P 500 .SPX fell 1.2 percent on Thursday, its biggest loss since Feb. 23, and is on course for its biggest weekly decline in two months.
Much of the volatility this week has been fuelled by the yen’s surge against the dollar, which caught many market participants off-guard and fuelled speculation Tokyo could intervene in the currency market to halt the rally.
The dollar was last up just 0.4 percent at 108.60 yen, leaving it set for a weekly fall of 2.7 percent. On Thursday it fell as low as 107.67 yen.
Sharp appreciation of the yen against the dollar is often a warning sign of broader financial market stress and investor risk aversion, which has been exacerbated this week by growing uncertainty surrounding the U.S. economic and policy outlook.
Federal Reserve Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is on a solid course and still on track to warrant further interest rate hikes.
But many forecasts, including the closely-followed Atlanta Fed GDPNow tracker, have slashed first quarter GDP estimates to just 0.4 percent, and U.S. interest rate futures still imply a less than 20 percent chance of a rate hike in June.
Next up is New York Fed president Bill Dudley, a dovish and influential policymaker, who speaks later on Friday.
“A combination of falling U.S. real rates and elevated market volatility are weighing on the dollar versus the euro and yen,” BNP Paribas currency strategists wrote in a note to clients on Friday.
“New York Fed President Dudley speaks today and could provide another counterweight to the various Fed presidents advocating resumption in rate hikes in recent weeks.”
The euro EUR= was trading at $1.1370, unchanged on the day and flat on the week, having hit a six-month high of $1.1454 on Thursday.
The 10-year U.S. Treasuries yield US10YT=RR was last up 3 basis points at 1.72 percent, having fallen to a six-week low of 1.685 percent on Thursday. It has fallen 25 basis points in the last four weeks.
In commodities markets, oil was up sharply after firm economic indicators from the United States and Germany implied support for fuel demand, but analysts warned another downturn could be on the way due to persistent oversupply.
Global benchmark Brent crude futures LCOc1 climbed 3.2 percent to $40.69 per barrel, and were set for a rise of more than 5 percent on the week. U.S. crude CLc1 advanced 3.7 percent to $38.60, on track for a near 5 percent weekly gain.