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European bourses are becalmed after a soft Asia session, while the dollar and Treasury yields are just inching higher, as the reflation trade that this week powered global stocks to record levels loses some momentum.

Trading in major forex crosses is subdued, oil prices are steady and gold is just a touch softer.

What to watch

Trading volumes may be thinner than usual later on Wall Street because some investors could be reluctant to enter fresh positions ahead of a long weekend. The US markets will be shut on Monday for the Presidents’ Day break.

Before that a light roster of economic data includes the UK retail sales report. Analysts’ consensus compiled by Reuters are forecasting sales growth of 0.9 per cent in the month to January. Ahead of the news, sterling is up just 1 pip to $1.2488.

Hot topic

In what has otherwise been a rather uneventful session to date, the disappointing time had by a number of big-name Asian companies stands out.

Shares in Japan’s Toshiba dropped 10.5 per cent, bringing the company’s market capitalisation nearly 25 per cent lower for the week as problems at the group’s nuclear division continue to rattle investors.

SoftBank dropped 1.6 per cent as investor enthusiasm appeared to wane for the company’s $3.3bn acquisition of US alternative asset manager Fortress Investment Group. The stock has erased its post-announcement gains and the move contributed to a 0.4 per cent fall for Tokyo’s Topix index.

In South Korea, Samsung Electronics fell as much as 2 per cent on Friday before closing down 0.4 per cent after the early-morning arrest of Lee Jae-yong, heir apparent of Samsung Group. The arrest of Mr Lee for bribery, embezzlement and perjury was made in connection with an investigation by a special prosecutor into the massive corruption scandal that has engulfed President Park Geun-hye. The Kospi index dipped 0.1 per cent.

Hong Kong-listed shares in MGM China fell 3 per cent after the casino operator announced underwhelming fourth-quarter results that showed mass-market revenue for the period down 2 per cent from the previous year. Shares in rival Sands China lost 2.4 per cent and the benchmark Hang Seng index slipped 0.4 per cent.

Equities

With China’s Shanghai Composite down 0.9 per cent and Australia’s S&P/ASX 200 easing 0.2 per cent, the FTSE Asia-Pacific index, which on Thursday hit a 19-month high, fell 0.4 per cent.

The sour handover from Asia is dampening any bullish residue in Europe, where the Stoxx 600 index is flat at 370.2.

The Stoxx closed mid-week at 371.5, its best level since December 2015, as the reflation trade, powered by hopes president Donald Trump’s policies can boost the US economy, thereby increasing inflation and tightening monetary policy, rippled across global markets.

Ian Williams, strategist at Peel Hunt, noted that European equities had given back a small proportion of their recent gains, “but the broader uptrend is intact thanks to renewed optimism about the global growth outlook and supportive bottom-up corporate earnings”.

US index futures suggest the S&P 500, which hit a record close of 2,349.3 on Wednesday, may dip 2 points to 2,345.2 when trading gets under way later in New York.

Forex

Currency traders have not had the most exciting of days so far.
Even the usually quite choppy dollar/yen cross has moved in a range of just 32 pips as dealers take time to reflect on whether the reflation strategy that has lifted the buck of late has more legs.

The yen is currently 0.2 per cent weaker at ¥113.39 and the euro is off 0.1 per cent to $1.0658 as the dollar index adds just 0.1 per cent to 100.54.

Fixed income

Yields, which move inversely to prices, are nudging higher for sovereign bonds, retracing a portion of the previous session’s dip.

The US 10-year Treasury yield is up 1 basis point to 2.46 per cent, while the more policy-sensitive 2-year note is adding 1bp to 1.22 per cent.

Futures markets are pricing in a 36 per cent chance that the Federal Reserve will raise interest rates by 25 basis points at its meeting in March.

German 10-year Bund yields are up 1bp to 0.36 per cent as equivalent maturity French paper rises 4bp to 1.05 per cent amid worries about the upcoming election.

Commodities

Oil prices are settling down on Friday after a sharp slide in the previous session amid continued concerns about rising crude stockpiles in the US.
Brent, the international benchmark, is up 0.3 per cent to $55.80 a barrel, having fallen as much as 1.1 per cent on Thursday. The US marker, West Texas Intermediate, is adding 0.2 per cent to $53.44.

Gold is struggling to make much headway in the face of a slightly firmer dollar and higher bond yields, the bullion retreating 0.2 per cent to $1,237 an ounce.

Copyright The Financial Times Limited 2017. All rights reserved.
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