European stocks were higher on Friday with the Euro Stoxx 50 index pulling away from five-week lows as the FTSE remains trapped in a tight 150 point range.
A recovery in risk appetite on Friday that has seen funds flow out of bonds and back into equities can almost exclusively be laid at the feet of a rebound in the oil price. This puts the recovery on risky ground given the absence of confidence that producers can reach agreement at next week’s meeting in Doha.
The Japanese finance ministry has said it is willing to take steps as needed on the “one-sided” yen moves, helping the currency reverse some its 400pip gains this week. The drop in the yen will at the margins be a source of relief for equity investors aware of the strong historical correlation between USD/JPY and the S&P 500. At this stage the drop in the yen is likely end-of-week profit-taking at the end of a fierce five-day winning streak.
Gains on the FTSE 100 were being led by oil and basic resource sectors whilst financial and healthcare stocks reversed fortunes from earlier in the week.
Banks shares recovered from losses induced by ECB minutes that rekindled concern of negative interest rates after ECB President Mario Draghi said the central bank would act as an “anchor of confidence.”
The healthcare sector is seeing some profit-taking after a strong week that saw investors switch out of Allergan (NYSE:AGN) and into other UK-listed companies in the hopes of benefiting from future mergers.
Shares of Experian (LON:EXPN) were propping up the UK benchmark after concerns over its exposure to Brazil prompted a broker downgrade.
A rebound in global risk sentiment and warnings from Japanese officials that have helped some temporary respite in yen-buying is setting up US markets for a higher open.
USA pre-opening levels
S&P 500: 12 points higher at 2,053
Dow Jones: 79 points higher at 17,620
Nasdaq 100: 26 points higher at 4,501
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