Friday 21.30 GMT. An initially mildly positive start to the global session has been smacked down by a surge in the dollar and worries about US retailers after Wall Street trading kicked in.

The FTSE All-World equity index is down 0.6 per cent, industrial commodities have lost some early gains and yields on US Treasuries are softer. The S&P 500 in New York is down 0.8 per cent and the FTSE Eurofirst 300 is off 0.2 per cent as cyclicals falter.

Asian shares had closed mixed and Europe was higher before worries about eurozone growth and sovereign debt clobbered the euro.

The single currency is down 1.1 per cent to $1.4158 after the Bundesbank said in its monthly bulletin that the German economy would lose momentum in coming months and as peripheral spreads widened.

Greek government 10-year bond yields have spiked 55 basis points to 16.55 per cent as investors position for the expected restructuring, and after Fitch downgraded Athens’ debt.

Perhaps of more concern to the market is a deterioration in Spanish sovereign bonds, where the yield on 10-year paper is up 8 basis points to 5.48 per cent, closing in on the euro-era high of 5.55 per cent hit in April

Trading Post

European currency havens are fairly rare. Even so, Adrian Schmidt at Lloyds Bank Corporate Markets believes there is a trade to be made differentiating two of them: the Swedish krona and the Swiss franc.

“The SKr has traded very closely with yield spreads against the euro in recent months,” Mr Schmidt says. “This contrasts with the SFr, which has ignored widening yield spreads with the eurozone and has traded much more in line with the widening dispersion between EU periphery yields and Bund yields. Clearly, this indicates that the SFr is seen as more of a haven than the SKr.”

That makes some sense. Growth in Sweden was hit badly in 2008-09 as the global economy faltered, while Switzerland outperformed. If conditions in the eurozone periphery worsen, the Swiss franc will be supported.

But “there is effectively no premium applied to the SKr by virtue of its superior fundamentals relative to the eurozone”, Mr Schmidt says. “The fact that SFr/SKr is at the highs of the last year in spite of exceptional Swedish growth performance . . . suggests these are good levels to buy SKr and sell SFr.”

Protests in Spain ahead of regional and municipal polls appear to be worrying investors that Madrid’s austerity drive may be compromised, potentially worsening its fiscal position. The extra premium traders demand over German Bunds has risen to a four-month high of 241 basis points.

The fall in the single currency is helping push the dollar index up by 0.3 per cent to 75.47 – a trend that remains no friend to risk assets.

Commodities had been seeing decent gains for much of the session as traders were adopting a timidly bullish tack, hopeful that such products will be supported by continuing largesse from many of the developed world’s central banks should recent evidence of weakening growth persist.

WTI crude is up 1.1 per cent at $99.49 – having earlier been down 1 per cent, in an example of the range-bound trading seen lately – and copper has halved its early advance to trade up 1.3 per cent at $4.12 a pound.

Gold is managing to hold on to a pop of 1.2 per cent, the first time it has crossed $1,510 since early last week, as haven flows counteract the buck’s rise. Another popular refuge, Treasuries, are also benefiting from the Friday fear. US 10-year yields are down 3 basis point to 3.14 per cent.

The mood in equities has been further soured by a sharp stumble in US retailing stocks after Gap and Aeropostale delivered downbeat forecasts.

This has dropped the S&P 500 down to 1,334, meaning it is due to record the third week in a row of declines as investors again fail to push it through fresh cyclical highs above 1,360.

Indeed, the S&P has now been stuck within a roughly 30-point closing range for 21 sessions as the softer economic data has been joined by a somewhat wet end to an otherwise decent first-quarter earnings season.

Still, bulls will point to the continuing rumblings of M&A and Thursday’s incredible IPO of LinkedIn as evidence that animal spirits roam the markets. Cynics are already arguing that such an IPO pop is a sure sign there is more money than sense swirling around.

The social networking group is up another 8 per cent mid-morning in New York.

Earlier, in Asia, shares fluctuated as resources stocks fell on lower commodity prices overnight, leaving the FTSE Asia Pacific index flat on the day.

The region’s benchmark was held back by a 0.1 per cent dip for Japan’s Nikkei 225 Stock Average as investors fretted about prospects for the country’s power sector in the light of troubles for Tepco, which runs the stricken Fukushima Daiichi nuclear power plant.

Australia’s S&P/ASX 200 lost 0.5 per cent, as miners inherited Thursday’s global slide in raw material prices. South Korea’s Kospi Composite was up 0.8 per cent despite foreigners selling for the seventh straight session.

Hong Kong’s Hang Seng index inched up 0.2 per cent, led by financial shares, but the gain was capped by weakness in resources stocks.

On the mainland, the Shanghai Composite index was down fractionally, but Chinese shares fluctuated with rare earth material shares gaining ground after Beijing said it would expand export quotas for the sector.

Reporting by Jamie Chisholm in London and Telis Demos in New York

Get alerts on Eurozone economy when a new story is published

Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article