1. Trump takes aim at Fed
U.S. President Donald Trump broke a long-held presidential tradition of not weighing in on Federal Reserve’s monetary policy when he criticized the central bank’s plans for gradual interest rate hikes.
The Fed raised has rates twice so far this year and Trump expressed his disappointment in a CNBC interview late Thursday.
“I’m not thrilled,” Trump said. “Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.”
Markets are forecasting that the Fed will hike rates again in September and put the probability for an additional increase in December at around 60%.
The dollar, which is has been buoyed by expectations of further rate increase, was trading lower against major rivals after three straight days of gains.
2. Microsoft jumps on earnings with GE and Honeywell on tap
Corporate earnings will continue to weigh heavily on market direction amid a lack of top-tier economic data on the calendar for Friday.
Microsoft (NASDAQ:MSFT) stock jumped 3.9% in pre-market trade after reporting better-than-expected quarterly numbers that were boosted by cloud services revenue. The Dow component reported earnings of $1.13 cents per share on $30.09 billion in revenue. That was above Wall Street estimates of $1.08 per share on revenue of $29.21 billion.
Quarterly earnings from both General Electric Company (NYSE:GE) and Honeywell International Inc (NYSE:HON), due before the open on Friday, will likely garner the most attention amid a slew of earnings from several companies including Schlumberger, Baker Hughes, State Street, SunTrust Banks and others.
3. Yuan undergoes volatility after Trump attack, China fixing
Market participants kept a close eye on volatility in USD/CNY on Friday as Trump commented on the Chinese currency but China’s central bank also weakened its daily reference rate.
In the CNBC interview Trump commented that a strong dollar puts the U.S. at a disadvantage and emphasized that the Chinese yuan “was dropping like a rock”.
However, that didn’t stop the the People’s Bank of China from dropping the midpoint for a seventh straight trading day to 6.7671 per dollar on Friday, 605 pips or 0.9% weaker than the previous fix of 6.7066.
Friday’s fixing was the lowest since July 14, 2017, and represented the biggest one-day weakening in percentage terms since June 27, 2016.
The yuan treaded water after tumbling to a one-year low earlier, with some observers suggesting that Chinese banks began buying the yuan and selling dollar in an apparent attempt to prop the currency up.
4. U.S. stock futures point to mixed open despite Microsoft support
U.S. futures pointed to a mixed open on Friday as Microsoft’s positive earnings supported tech stocks but investors generally remained cautious. At 6:01 AM ET (10:01 GMT), the blue-chip Dow futures slipped 17 points, or 0.07%, S&P 500 futures dropped less than a point, or 0.01%, while the Nasdaq 100 futures traded up 28 points, or 0.38%.
European stocks were mostly higher nearing their midday trade as investors concentrated on earnings news and digested Trump’s comments about the Fed and the strong dollar.
Earlier, Asian shares underwent volatile trade as investors kept their focus on the yuan.
5. Oil prices head higher, despite weekly decline
Oil prices headed higher on Friday, recovering some of its weekly decline, as traders focused on comments that Saudi Arabia would reduce exports in August and waited for the latest weekly data on U.S. drilling activity.
Saudi Arabia’s OPEC governor Adeeb Al Aama said that exports in July from the cartel’s top producer would be roughly in line with the 7.2 billion barrels per day that were exported in June, according to a Dow Jones report.
He further noted that the kingdom plans to cut exports by roughly 100,000 barrels per day in August as it works to ensure it does not push oil into the market beyond customers’ needs, avoiding worries that oversupply would curtail prices.
Al Aama indicated that concerns that Saudi Arabia, OPEC’s largest producer and the cartel’s de facto leader, and its partners would oversupply markets are “without basis”.
U.S. crude oil futures gained 0.66% to $68.69 at 6:03 AM ET (10:03 GMT), while Brent oil traded up 0.80% to $73.16.
Still, oil is on track for weekly losses of about 3% and has declined nearly 8% this month as supply concerns weighed on crude prices.
U.S. production will also be in focus later on Friday when Baker Hughes releases its weekly report on drilling activity. The U.S. oil rig count remained unchanged at 863 last week, as drillers appeared to hold output steady given the decline in prices.