Investors shifted into the USA unit after New York Federal Reserve president William Dudley said there was a strong case for borrowing costs to rise, while his San Francisco counterpart John Williams expects such a move to get "serious consideration" when the bank meets this month. Beyond that however, the health of the economy and the underlying stability of financial markets would benefit from a revitalized Fed strategy that is both able and willing to lead markets, rather than be led by them.
Gold is expected to remain under pressure next week, respondents to the S&P Global Platts Gold Sentiment Survey said Friday, on the increasing possibility of a March lift in U.S. interest rates, sooner than previously expected. The index posted its biggest decline of 2017 on Thursday a day after notching its biggest gains a day earlier, when it closed a few points below 2,400.
China's Shanghai Composite was down 0.5 per cent, while the technology-focused Shenzhen Composite eased 0.2 per cent.
As a result of these events, March Fed rate hike bets surged to 80% overnight, keeping the US Dollar firm.
If there are any doubts that the Federal Reserve will hike interest rates in March, Chairwoman Janet Yellen just quashed them. That was the largest 12-month gain in almost five years and just below the Fed's 2% target for inflation. That probability was less than 20% only a month ago. The only new relevant information due between now and the two-day meeting's start on March 14, to factor into the board's decision, is the nonfarm payrolls report on March 10.
Rapid gains and record levels on the main indexes since the November 8 election have stoked concerns about stretched valuations among some analysts.
USA stocks were down amid investor caution ahead of speeches by Fed Chair Janet Yellen and Vice Chair Stanley Fischer on Friday.
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Forward price-to-earnings ratio on the S&P 500 is at 17.9, the highest level since 2004 (http://www.marketwatch.com/story/by-one-measure-stock-valuations-are-at-their-highest-level-since-2004-2017-02-17).
Europe's benchmark STOXX 600 fell 0.1 percent but was also on track to end the week higher.
Nothing, it seems, can stop stock markets going up.
Two-year US Treasury yields jumped to 1.304 per cent, the highest since December, to match their highest levels since 2009.
And indeed the view among Fed policymakers appears to be that further policy tightening is appropriate regardless of any potential fiscal boost, as inflation edges higher and the economy nears the Fed's goal of full employment.