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Top 5 Things to Know in the Market on Friday

EconomySep 22, 2017 06:19
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© Reuters. 5 key factors for the markets on Friday - Here are the top five things you need to know in financial markets on Friday, September 22:

1. North Korea may detonate H-bomb in Pacific

North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after U.S. President Donald Trump vowed to destroy the reclusive country, with leader Kim Jong Un promising to make a "mentally deranged" Trump pay dearly for his threats.

The response came after Trump said in his first address to the United Nations on Tuesday that he would "totally destroy" North Korea, a country of 26 million people, if it threatened the United States and its allies, and called Kim a "rocket man" on a suicide mission.

Pyongyang’s new threat spooked Asian stock markets on Friday with Japan’s Nikkei 225 and China’s Shanghai Composite ending around 0.2% lower.

European shares were also under pressure on the geopolitical tensions, while U.S. futures pointed to a lower open.

At 5:42AM ET (9:42GMT), the blue-chip Dow futures lost 0.11%, S&P 500 futures edged down 0.15% while the Nasdaq 100 futures traded down 0.28%.

2. Markets digest business activity ahead of U.S. PMI, Fed appearances

European investors digested strong readings of business activity from the euro area on Friday.

The IHS Markit composite purchasing managers’ index (PMI) for the euro zone unexpectedly improved, showing business activity in September gave one of its strongest readings in six years, let by better than expected strength in both Germany and France.

The European data came ahead of IHS Markit’s preliminary reading on both the manufacturing and services sector for the U.S. due at 9:45AM ET (13:45GMT) Friday in a session with no other major economic reports.

However, markets will pay attention to a string of appearances from Federal Reserve officials, including San Francisco Fed president, John Williams, Fed Governor Esther George and Dallas Fed chief Robert Kaplan.

3. Oil holds steady with focus on OPEC meeting

Oil prices traded near the unchanged mark on Friday as investors waited to see if major oil producers would make any announcements about a possible extension of supply cuts beyond March after their meeting in Vienna.

Traders also looked ahead to the latest read on U.S. shale production when Baker Hughes releases its most recent weekly rig count data later on Friday.

U.S. crude oil futures were unchanged at $50.55 at 5:45AM ET (9:45GMT), while Brent oil inched up 0.09% to $56.48.

4. Pound sees cautious trade ahead of UK PM May’s Brexit speech

British Prime Minister Theresa May is scheduled to present a speech Friday in Florence, Italy, that is hoped to give new impetus to talks over the UK’s departure from the European Union, known as Brexit.

May had already signaled that she plans to use Friday’s appearance to sidestep the EU negotiator Michel Barnier and appeal directly to the leaders of the 27 other EU governments who are the ones responsible for eventually rubber-stamping any agreements.

May will likely begin discussions on the so-called “Brexit bill”, possibly conceding to the EU’s demand that the UK pay billions of euros to kick-start the divorce proceedings, in the hope that leaders will be willing to sanction trade talks as soon as next month.

The pound was seeing some weakness in Forex markets as investors remained wary ahead of the May’s appearance. At 5:45AM ET (9:45GMT), GBP/USD dropped 0.18% to 1.3558, while EUR/GBP gained 0.58% to 0.8843.

5. German elections may not be market factor

Germany was gearing up for elections on Sunday with most analysts suggesting that the results would likely have no effect on markets.

There seemed to be little doubt that Angela Merkel will be reelected Chancellor and that Wolfgang Schaeuble will likely retain the Finance Ministry, though questions remained about the final formation of the government for the euro zone's largest economy.

Merkel’s CDU will likely not win the majority with most odds pointing to either a resurgence of the current coalition government with center-left SPD, or a new formation with the smaller pro-business FDP party and Greens.

More than the victory itself, many analysts are keeping an eye on the rising popularity of the far right Alternative for Germany (AfD) party that is running on an anti-immigrant, anti-euro platform.

Afd is currently polling in third place and is expected to gain enough votes to enter the national Bundestag for the first time, making it the first nationalist, right-wing party to enter the German parliament since World War II.

Top 5 Things to Know in the Market on Friday

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