Asian stocks stepped back in subdued trade on Friday as Wall Street took a breather from its relentless rise since the US election, while the dollar hovered below the 14-year high set earlier this week.
MSCI’s broadest index of Asia-Pacific shares outside Japan, which touched a five-month low on Thursday, eased 0.3 per cent, heading for a weekly drop of 1.6 per cent in its second consecutive week of declines.
China’s CSI 300 index extended losses to 0.5 per cent, on track to lose 0.8 per cent for the week. Hong Kong’s Hang Seng retreated 0.5 per cent, poised to end the week down 0.5 per cent.
Japan’s Nikkei, closed for a holiday on Friday, is up 0.1 percent for the week. The index has posted seven straight weeks of gains, its longest winning streak since early 2013, boosted by the yen’s weakness in the face of a surging dollar.
Overnight, US equities posted their first back-to-back daily declines of the month in light trading ahead of the Christmas weekend. US indices fell as much as 0.4 per cent on Thursday.
“Santa has taken a leave of absence into the end of the week,” Jingyi Pan, market strategist at IG in Singapore, wrote in a note. “Asian indices could remain depressed into the end of the year.”
Wall Street stocks have been on a tear since the US election on expectations that Donald Trump’s promised fiscal stimulus will boost economic growth and company profits.
The DowJones Industrial Average has surged 8.7 per cent since before the election results were announced.
Markets globally appeared be on pause for the holidays, with the MSCI World index down 0.16 per cent on Thursday, and little changed on Friday.
Montedei Paschi bailout
Europe’s STOXX 600 index closed down 0.2 per cent on Thursday, with the broader downtrend offsetting optimism on hopes of a government bailout for troubled Italian lender Montedei Paschi di Siena.
Early on Friday, the Italian government approved a rescue of the world’s oldest bank, after it failed to raise enough money from private investors to stay afloat.
Prime Minister Paolo Gentiloni told reporters his cabinet had authorised the creation of a 20-billion-euro ($21 billion) fund to prop up Italy's embattled banking sector, with Monte deiPaschi expected to be first in line for help.
In the foreign exchange markets, the dollar was subdued having scaled its highest point since December 2002 on Tuesday. It has since hovered below that level, with traders unwilling tomake any big moves ahead of the holiday weekend.
The dollar index, which tracks the greenback against a basket of six global peers, was little changed at 103.05, down from Tuesday’s 103.65 peak. It is poised to end the week 0.1 per cent higher.
The dollar inched down 0.1 per cent against the yen to 117.49, set for a 0.4 per cent loss for the week.
Still, most traders retain positive bets on the US currency, particularly after upbeat economic data, including business spending, and an upward revision to third-quarter economic growth on Thursday.
“The trend is definitely for a stronger dollar,” StephenCasey, senior currency trader at Cambridge Global Payments inNew York. “Any dip in the dollar will a buying opportunity.”
The euro edged up 0.1 per cent to $1.0435 on Friday, narrowing its weekly loss to 0.1 per cent.
Sterling was little changed at $1.228, on track for a weekly slide of 1.6 per cent.
Crude oil
Oil prices slipped as investors took profits after Thursday’s gains driven by strong US economic data and optimism that crude producers would keep to their pledge to limit output.
US crude retreated 0.6 per cent to $52.65 a barrel on Friday, but remains on track for a 1.45 per cent gain for the week.
As risk appetite ebbed on Friday, the decline in gold prices, which have languished in the wake of the dollar’s rally, reversed. Spot gold climbed 0.2 per cent to $1,130.51 an ounce, shrinking its weekly loss to 0.3 per cent.