After four consecutive days of failed upside breakouts in the S&P, some have noticed a change in sentiment, and as Georg Schuh, CIO of Deutsche Asset Mgmt told Bloomberg, "we have moved our view on stocks from ‘buy the dips’ to ‘sell the rebounds’." adding that "I’m not ruling out one final peak in stocks, but we’re getting late in the cycle and we’re starting to see anecdotal evidence that points toward the end of the rally."

The mood appears to be spreading and world stocks wavered, and the dollar eased on Friday as turmoil in the U.S. administration kept markets watchful at the end of a week scarred by concerns that U.S. tariffs could provoke a trade war. The MSCI All-Country World index was flat after three straight sessions of losses and was set for a weekly fall of around 0.6%, while US futures and global stocks were mixed.

Mood on the last day of the week is so subdued, Cramer's "pajama traders" have not even attempted their traditional overnight spike in the ES.

European stocks drifted following a mixed session in Asia, while the dollar weakened largely as a result of a jump in Japan’s yen which helped drive down Bloomberg’s dollar index. Japan’s currency rose against all its Group-of-10 peers as the Washington Post reported there was a plan to replace H.R. McMaster and it may be part of a broader shake-up including other senior officials. However, White House Press Secretary Sarah Sanders said there were no plans for any change at the National Security Council.

“A firing would just increase the market’s nervousness about the turnover in the White House administration,” said Mansoor Mohi-uddin, head of currency strategy at NatWest Markets in Singapore. "It would also make investors more concerned about whether officials in the White House who are more in favor of free trade are now leaving the Trump administration."

Investors continue to weigh the prospects for heightened U.S. trade protectionism after new White House appointee Larry Kudlow said he’d sell gold and buy the greenback, which gained on Thursday. Also on Thursday, the New York Times reported that U.S. Special Counsel Robert Mueller had issued a subpoena for documents, including some concerning Russia, related to President Donald Trump’s businesses.

“Trump isn’t giving markets much respite,” said Rabobank analyst Bas van Geffen in a note. “While still vague at best, the subpoena does bring the investigation yet another step closer to the president. Markets certainly didn’t like the added uncertainty.

Overnight technical problems at German exchanges lead to delayed open for various products and muted trading session. The USD/JPY edged through overnight low despite denials from White House that McMaster is getting fired. Emerging market FX underperformed again led by TRY. European equity markets hold small gains, with the mining sector outperforms after metals partially retrace yesterdays sell-off; U.S. equity futures remain in a tight range. Bunds edge higher with most noting the large dropoff in supply next week; USTs back toward yesterday’s high, curve flattens further with focus likely to be on today’s Libor fix.

Asian stocks traded mixed following an indecisive lead from the US and as overnight trade lacked any tangible catalysts to dictate price action. Australia's ASX 200 (+0.5%) and Nikkei 225 (-0.6%) were mixed with Australia led by Consumer Staples as Wesfarmers shares surged on plans to spin off its Coles supermarket chain, while Nikkei 225 was kept subdued by a firmer JPY and as cover-up allegations were fuelled by reports PM Abe knew of the document alterations days before the public admission. Elsewhere, Hang Seng and Shanghai Comp. were choppy after the PBoC skipped open market operations and instead announced to lend CNY 327bln via its MLF.

Following Asia's subdued close to the week, European shares found some support in dealmaking activity although the STOXX 600 was on track for a 0.2 percent weekly loss. The final European session of the week saw bourses trading in mixed fashion following from the indecisive lead from Asian and US counterparts. On a sector basis, energy names were outperforming this morning amid the slight push higher in oil prices. UK homebuilders are lagging in the FTSE 100 after Berkeley Group warned over challengers in increasing housing supply further. Elsewhere, NEX Group (+35%) shares surge the most in history after they confirmed that CME Group have approached them.

The Bloomberg Dollar Spot Index gave up its weekly gains on concerns of more White House changes following reports Trump was ready to remove his national security adviser, adding to concern about more political turmoil in Washington. The gauge of dollar strength retreated on Friday as investors with long-dollar positions found themselves under pressure due to the continuing uncertainties surrounding Trump administration. The yen rose against all its Group-of-10 peers as the Washington Post reported there was a plan to replace H.R. McMaster and it may be part of a broader shake-up including other senior officials. White House Press Secretary Sarah Sanders said there were no plans for any change at the National Security Council.

Still, in light of the ongoing funding shortage which yesterday sent the Libor-OIS and FRA-OIS soaring to fresh 6 year highs, it is possible that the USD sees a sharp squeeze higher in the coming days.

Here are the other notable overnight FX moves, from Bloomberg:

• Haven currencies led by the yen advanced against the dollar and U.S. Treasuries rose after U.S. President Donald Trump was reported to be ready to remove his national security adviser H.R. McMaster, fueling concerns of more turmoil inside the administration, even as it was denied by White House Press Secretary Sarah Huckabee Sanders
• The euro edges up on the day, trading near the middle of its range since mid-January amid a trend of falling realized volatility seen over the past six weeks, causing Bollinger bands to narrow
• The pound advanced amid optimism that the U.K. will be able to hash out a deal on the Brexit transition phase with the EU by next week’s summit; still, the U.K. has significant ground to cover on the Irish question if it wants to get a deal on the transition phase next week, according to three European diplomats
• Slowing factory growth helped prompt the New Zealand dollar to weaken against the Aussie, which itself was under fire from macros and option accounts

Southern European government bonds outperformed their higher-rated peers as another ECB policymaker warned that inflation in the euro zone is still proving elusive, a potential hurdle to the withdrawal of monetary stimulus. Other euro zone bond yields also dipped. Germany’s 10-year bond touched a fresh five-week low of 0.57%.

U.S. Treasuries yields dipped to 2.815 percent US10YT=RR after having hit a near two-week low of 2.797 percent on Thursday. The two-year yield US2YT=RR steadied after hitting a 9 1/2-year high of 2.295 percent as investors prepared for a widely expected interest rate increase by the Federal Reserve next week.

Weakness in the dollar helped copper prices recover from early falls. Three-month copper on the London Metal Exchange was up 0.52 percent at $6,956 a ton. Oil prices edged up but were set to fall this week on concerns among investors about rising supply from the United States and elsewhere threatening to undermine efforts by OPEC and other producers to tighten the market.

Market Snapshot

• S&P 500 futures up 0.1% to 2,757
• STOXX Europe 600 unchanged at 376.88
• MSCI Asia Pacific down 0.1% to 178.50
• MSCI Asia Pacific ex Japan down 0.1% to 587.64
• Nikkei down 0.6% to 21,676.51
• Topix down 0.4% to 1,736.63
• Hang Seng Index down 0.1% to 31,501.97
• Shanghai Composite down 0.7% to 3,269.88
• Sensex down 1.1% to 33,316.33
• Australia S&P/ASX 200 up 0.5% to 5,949.42
• Kospi up 0.06% to 2,493.97
• German 10Y yield fell 1.0 bps to 0.566%
• Euro up 0.1% to $1.2320
• Brent Futures up 0.02% to $65.13/bbl
• Italian 10Y yield fell 2.7 bps to 1.73%
• Spanish 10Y yield fell 2.7 bps to 1.355%
• Brent Futures unchanged at $65.12/bbl
• Gold spot up 0.2% to $1,318.85
• U.S. Dollar Index down 0.2% to 90.00

Top overnight News:

• President Donald Trump is not about to oust his national security adviser, H.R. McMaster, according to White House Press Secretary Sarah Huckabee Sanders, even as speculation intensified that McMaster’s departure had already been decided. Washington Post earlier reported that President Trump has decided to remove H.R. McMaster as his national security adviser
• Special Counsel Robert Mueller may have crossed a line President Donald Trump set out early in the investigation into possible Russian meddling with his latest move: a reported subpoena of the Trump Organization.
• The U.K. has significant ground to make up on the Irish border issue before next week’s summit where it aims to clinch a deal on a Brexit transition period, European diplomats said.
• Parliament’s upper and lower house quickly confirmed BOJ Governor Kuroda’s appointment, and that of his new deputies Masayoshi Amamiya and Masazumi Wakatabe, as lawmakers continued their focus on the controversial land deal linked to Abe and the finance ministry’s tampering with associated documents.
• The support rate for Japan Prime Minister Abe’s cabinet fell to 39.3% -- down 9.4 percentage points from a similar poll last month -- according to a survey by Jiji Press. Disapproval exceeded approval for the first time in five months in a sign that new revelations in a long-simmering land-sale scandal could threaten his government
• The U.S. sanctioned a St. Petersburg-based “troll farm,” a close ally of Russian President Vladimir Putin, two Russian intelligence services and other Russian citizens and businesses indicted by Special Counsel Robert Mueller on charges of meddling with the 2016 U.S. presidential election.
• Reserve Bank of Australia Deputy Governor Guy Debelle said global investors are underpricing the uncertainty over the future path of interest rates, warning markets are likely to see higher volatility
• Trump’s decision to fire Tillerson has put the Iran nuclear agreement at risk and cast new uncertainty on a meeting of the accord’s signatories on Friday
• ECB policymaker Peter Praet opposed shifting the institution’s language on its stimulus plans anytime soon, saying rising labor supply suggests the euro-area’s economic slack may be greater than previously thought
• Japan’s labor unions won pay raises for workers, although they’re still too small to generate the big increase in consumption that the Bank of Japan needs for inflation. BOJ Governor Haruhiko Kuroda secured parliamentary backing for a fresh five-year term
• Euro-area inflation slowed more than initially estimated last month, highlighting the challenge facing the European Central Bank as it tries to stoke prices
• Swimming in it. the prospect of more Bank of England interest- rate increases this year threatens to add pressure on more than 3 million Britons already in severe debt
• Investors poured $43.3b into equity funds, the most on record, analysts at BofAML say in research note citing EPFR Global data for week ending March 14

Asian stocks traded mixed following an indecisive lead from the US and as overnight trade lacked any tangible catalysts to dictate price action. ASX 200 (+0.5%) and Nikkei 225 (-0.6%) were mixed with Australia led by Consumer Staples as Wesfarmers shares surged on plans to spin off its Coles supermarket chain, while Nikkei 225 was kept subdued by a firmer JPY and as cover-up allegations were fuelled by reports PM Abe knew of the document alterations days before the public admission. Elsewhere, Hang Seng (Unch.) and Shanghai Comp. (Unch.) were choppy after the PBoC skipped open market operations and instead announced to lend CNY 327bln via its MLF, while US equity futures were briefly pressured on administration instability concerns after initial reports that National Security Adviser McMaster was said to be removed from position, although this was later denied by the White House. Finally, 10yr JGBs were marginally higher with support seen amid losses in Japanese stocks and with the BoJ also present in the market with its Rinban amounts left unchanged, while Aussie yields declined across the curve following a 10yr auction in which the average yield was down nearly 20bps from prior.

Top Asian News

• China’s Holdings of U.S. Treasuries Drop to Six-Month Low
• China Stocks Slide in Late Afternoon Trade as End of NPC Nears
• Japan’s Labor Unions Squeeze Small Pay Rise From Top Companies
• Samsung Elec. Stock Trading to Be Halted April 30-May 3 on Split

European markets picked up on the subdued Asian sentiment in the final session of the week mixed fashion following from the indecisive lead from its Asian and US counterparts. On a sector basis, energy names are outperforming this morning amid the slight push higher in oil prices. UK homebuilders are lagging in the FTSE 100, after Berkeley Group warned over challengers in increasing housing supply further. Elsewhere, NEX Group (+35%) shares surge the most in history after they confirmed that CME Group have approached them.

Top European News

• Italy’s Five Star at 34.5%, League 22.3% in SWG Poll: Messaggero
• FCA Probing Claims U.K. Bookmakers Created ‘False Market’: FT

In FX, the Bloomberg Dollar Spot Index gives up weekly gain after U.S. President Donald Trump was reported to be ready to remove his national security adviser, adding to concern about more political turmoil in Washington. The gauge has retreated on Friday as investors with long-dollar positions find themselves under pressure due to the continuing uncertainties surrounding Trump administration. The yen rose against all its Group-of-10 peers as the Washington Post reported there was a plan to replace H.R. McMaster and it may be part of a broader shake-up including other senior officials. White House Press Secretary Sarah Sanders said there were no plans for any change at the National Security Council. USD/JPY dropped 0.7% to 105.65; part of the yen gains could be down to funds’ repatriation and not just on a risk-off basis. The EUR/USD 0.2% to 1.2333; flows have remained muted throughout the week, traders in Europe say; pair shrugs off miss in euro-area final CPI reading for February. Technically, the euro faces a symmetrical triangle test that could signal its medium-term direction. Sterling found good support after London open, hitting its strongest level this month versus the euro at 0.8816. GBP/USD gains as much as 0.3% to 1.3980, on track for a second weekly advance; all eyes on Brexit talks before BOE meeting on March 22. Kiwi led losses in G-10; New Zealand’s currency weakened due to sales against the Aussie, which itself was under fire from macros and options accounts, according to another Asia-based FX trader. NZD/USD slipped 0.3% to 0.7256, having earlier touched 0.7241 low.

Commodities markets have seen a slight reprieve this morning with oil prices making marginal gains, however, WTI fell short by around USD 0.10 off yesterday’s high of USD 61.55/bbl. In the metals complex, gold has pushed up by USD 4/oz, having found support at the earlier weeks low of USD 1313.70/oz

Looking at the day ahead, February housing starts and building permits, February industrial production, January JOLTS and March University of Michigan consumer sentiment data cap off the week.

US Event Calendar

• 8:30am: Housing Starts, est. 1.29m, prior 1.33m; MoM, est. -2.71%, prior 9.7%
  • Building Permits, est. 1.32m, prior 1.4m; MoM, est. -4.14%, prior 7.4%
• 9:15am: Industrial Production est. 0.4%, prior -0.1%; Manufacturing (SIC) Production, est. 0.5%, prior 0.0%
  • Capacity Utilization, est. 77.7%, prior 77.5%
• 10am: JOLTS Job Openings, est. 5,917, prior 5,811
• 10am: U. of Mich. Sentiment, est. 99.3, prior 99.7; 1 Yr Inflation, prior 2.7%; 5-10 Yr Inflation, prior 2.5%

DB's Craig Nicol concludes the overnight wrap

While markets have spent much of the last 24 hours struggling for direction there is still an underlying feeling of caution in the air. The unpredictable headlines which seem to be coming out of Washington on an almost daily basis now is certainly keeping markets on edge and its perhaps little surprise that the S&P 500 has now fallen every day this week and has notched up its first four-day losing streak of the year. By the way, today actually marks 10 years to the day that JP Morgan originally agreed to buy Bear Stearns for $2 a share. As a bit of fun, we looked at the EMR from that day and we were reminded that that week also included the Eliot Spitzer scandal, the Fed announcing the introduction of the TSLF and a market priced roughly 50/50 for a 100bp Fed rate cut the next day! That’s one way of making current markets look dull.

So as we said above, markets ended up a bit mixed yesterday but actually kicked off on the front foot before the Mueller news (more on that below) put the brakes on. Indeed the S&P 500 closed -0.08% and is now down -1.41% this week. The Nasdaq also fell -0.20% while the Dow (+0.47%) actually held its head above water. In Europe the DAX and Stoxx 600 closed +0.88% and +0.52% respectively.

Bond markets were a bit more subdued with yields largely 1-2bps lower in Europe and 10y Treasuries +1.1bps up. The Treasury curve didn’t stop flattening however with 2s10s 1.6bps flatter yesterday which puts the weekly move at over 9bps, while 5s30s were -1.4bps flatter yesterday and therefore over 7bps flatter this week. Meanwhile, the VIX closed down less than a point and appears to have settled into this 15-20 range ever since the big vol spike last month. Elsewhere the USD index (+0.48%) nudged a little higher while Gold (-0.66%) fell by the most since in nearly weeks.

The most significant news yesterday came quite late in the US session as the NY Times broke with a story saying that special counsel Robert Mueller had subpoenaed Trump and his organization to turn over documents. That includes those related to Russia. The article noted the breadth of the subpoena was not clear but this is the first known instance of Mueller demanding records directly related to President Trump’s businesses. The White House press secretary Ms. Sanders noted the President was cooperating with the inquiry and referred a question to the Trump Organization.

Staying with politics, yesterday we also got the news that US Trade Representative Robert Lighthizer is to present his recommendations to President Trump in the coming weeks regarding the China intellectual property investigation. White House trade adviser Peter Navarro told CNBC that “this will be one of the many steps the president is courageously going to take to address unfair trading practices”. So this is certainly one to watch.

The other main headline grabber yesterday concerned some of the rhetoric around the Russia/UK diplomatic tensions. The leaders from US, Germany, France, and UK have formally signed a joint statement that accused Russia of the “first offensive use of a nerve agent in Europe since World War II”. At the same time, the US announced new sanctions to be placed on Russia on five groups and 19 individuals. Russia’s administration did respond yesterday with Foreign Minister Sergei Lavrov saying that he will “certainly” expel British diplomats.

In terms of the main overnight news and in case you hadn’t had enough of the White House merry go round, the  Washington Post released a story early this morning suggesting that President Trump has decided to replace his national security adviser H.R McMaster. The White House were quick to push back on the story however it remains to be seen with the WSJ subsequently releasing a story also suggesting that McMaster could be on his way out. Sentiment in Asia is softer overnight with the Nikkei (-0.47%), Kospi (-0.10%) and Hang Seng (-0.02%) all down.

Moving on. With regards to the latest Brexit developments, yesterday the EU published their latest version of the draft legal wording around the Brexit withdrawal agreement. The main note to make is that it included a new good faith clause which PM May had asked for. With regards to the contentious Northern Ireland issue, there was no change in text with the EU maintaining the message that it needs to remain part of the Single Market and customs union. Away from that, a Bloomberg story yesterday suggested that Brexit Secretary David Davis was predicting a transition deal period as soon as next week. This comes ahead of his meeting with the EU’s Michel Barnier next week.

On the same topic, yesterday the third largest company in the FTSE 100, Unilever, announced that it was moving its headquarters from the UK to Netherlands. As the FT highlighted, it’s likely to come as something of a blow to PM May as it will likely be seen as waning confidence in the UK as a result of Brexit.

In other news, yesterday’s economic data in the US was largely a mixed bag. The March Empire manufacturing index was above market at 22.5 (vs. 15.0 expected). The March Philly Fed business outlook index (22.3 vs. 23.0 expected) and the NAHB Housing market index (70 vs. 72 expected) were both slightly below expectations, although the former continued to point to upward pressure on prices paid. Elsewhere, the February import price index was above expectations (+0.4% mom vs. +0.2%) and outpaced the export price index of +0.2% mom.  Finally, the weekly initial jobless claims (226k vs. 228k expected) and continuing claims (1,879k vs. 1,903k expected) prints were both more or less in line.

In Europe, the final reading of France’s February CPI was confirmed at +1.3% yoy. The Swiss National Bank has left its deposit rate unchanged at -0.75% as widely expected. The SNB noted “the situation in the FX market is still fragile and monetary conditions may change rapidly”, making negative rates and SNB’s willingness to intervene in FX market essential. The bank now forecasts CPI of +0.9% in 2019 and +1.9% in 2020.

Looking at the day ahead, the most notable release in Europe will be the final February CPI report for the Euro area. In the US, February housing starts and building permits, February industrial production, January JOLTS and March University of Michigan consumer sentiment data cap off the week.