Yen strengthens, oil slides as risk aversion returns

Markets retreated on Friday as risk aversion returned after the end of a three-day winning streak for Wall Street and other markets. There was a slide in oil prices and the safe haven yen strengthened.

Volatility in oil prices picked up on Thursday, with prices at one point up by more than 3.5 per cent before the release of data showing total US crude inventories rose by less-than-expected in the previous week. That saw West Texas Intermediate, the US benchmark, end higher, but Brent crude, its international counterpart, ended lower.

On Friday morning, Brent and WTI were both down 0.8 per cent at at $34.01 a barrel and $30.54, respectively.

The euro fell for the fifth consecutive day as the market begins to focus on potential ECB easing but the yen was the top performer on the day with AUD lagging as a touch of risk aversion returned follow three days of positive momentum.

The yen was 0.3 per cent stronger this morning at Y112.90 and weighing on Japanese stocks. The currency, trading around a one-week high, was on track for its first back-to-back gain since last Thursday.

Gold, which is typically sensitive to interest rate moves, was down 0.3 per cent at $1,226.69 an ounce, but has gained in recent weeks as investors anticipate central banks will need to further open the stimulus spigot.

Japanese shares were the worst performers today, with the Nikkei 225 down 2.2 per cent and the Topix off 2.1 per cent. Hong Kong’s Hang Seng was down 0.4 per cent in morning trade, Australia’s S&P/ASX 200 was down 0.6 per cent today. China’s Shanghai Composite was flat while the tech-focused Shenzhen Composite was up 0.3 per cent.

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