International stock markets moved upward Friday, shrugging off rising tensions between the United States and Iran that have driven oil prices to their highest point in more than six months.
Europe’s STOXX 600 index gained 0.5% and was positioned for its fourth straight week of increases. U.S. S&P 500 futures also advanced 0.4%.
The trading session concluded a turbulent week for worldwide investments, as market participants navigated a mix of international conflicts, political uncertainties, and changing economic indicators.
“Clearly, equity investors are getting used to the noisy geopolitical environment,” said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers.
“They are still focusing on economic fundamentals instead of geopolitical risks. And when you look at metrics such as valuations, earnings and interest rate expectations, things look pretty stable.”
Data from LSEG I/B/E/S showed that among 163 STOXX 600 companies reporting quarterly earnings through Wednesday, 57.1% surpassed analyst projections.
In the S&P 500, approximately 73% of companies that announced earnings through last week beat revenue forecasts, according to the data. Next week’s spotlight will be on Nvidia’s earnings announcement.
Friday’s economic calendar included worldwide business activity reports, fourth-quarter U.S. economic growth numbers, and the Federal Reserve’s favored inflation measure – the core personal consumption expenditures price index.
The U.S. dollar was positioned for its biggest weekly increase in four months, boosted by moderately positive American economic data and Fed meeting notes indicating policymakers aren’t rushing to reduce interest rates.
Weekly dollar performance showed a roughly 1% gain against the euro, driving the shared European currency down to $1.1767.
“The dollar’s safe haven appeal is generally diminished, but is fully restored when geopolitical tensions trigger oil shocks,” said ING FX strategist Francesco Pesole.
In Japan, the yen weakened after inflation data revealed the country’s core price growth at 2% in January – the slowest rate in two years – potentially complicating the central bank’s interest rate increase plans.
The dollar rose 1.8% for the week to 155.4 yen.
U.S. Treasury bonds remained stable with 10-year yields at 4.07%, while disagreement shown in Fed minutes about whether and how quickly to reduce rates pushed two-year yields up five basis points for the week to 3.47%.
Germany’s 10-year government bond yields, the eurozone standard, were set for a 2 basis point weekly decline.
Brent crude oil futures reached 6-1/2-month highs above $72 per barrel after U.S. President Donald Trump established a 10 to 15-day timeframe for Iran to negotiate on its nuclear program or face consequences he described as “really bad things.”
“The political rhetoric has escalated sharply. Even limited disruption or credible threats to shipping lanes could cause an immediate supply shock,” said Capital.com senior market analyst Daniela Hathorn.
The combined developments prompted investors to avoid risky positions, according to Kenji Abe, chief strategist at Daiwa Securities in Tokyo.
“There does not seem to be much point in adding risk ahead of this weekend’s uncertainty surrounding the Middle East,” said Spectra Markets’ President Brent Donnelly.
“Today feels like a good day to stay out of trouble.”
