Asian stocks slip, US dollar flat as caution reigns before Trump inauguration

A businessman looks at the stock and forex indicators at the window of a security company in Tokyo, Japan.
A businessman looks at the stock and forex indicators at the window of a security company in Tokyo, Japan.PHOTO: AFP

SINGAPORE (REUTERS) - Caution was the name of the game in financial markets on Friday (Jan 20) ahead of US President-elect Donald Trump's inauguration later in the day, with Asian stocks and the dollar pulling back and US Treasury yields hovering near their highest close this year.

Investors were also awaiting fourth-quarter and full-year GDP data from China at 10am, Singapore time, for clues on how much momentum the world's second-largest economy is carrying into 2017.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 per cent, and looked set to end the week flat.

Japan's Nikkei rose 0.1 per cent, on track for a near 1 per cent weekly loss.

Australian stocks retreated 0.6 per cent, heading for a 1.1 per cent decline for the week. South Korean shares slid 0.3 per cent, poised to end the week 0.5 per cent lower.

Economists polled by Reuters expect China to report its economy grew by a steady 6.7 per cent in the fourth quarter from a year earlier, boosted by higher government spending and record bank lending.

While the stable headline growth may soothe investors, concerns are growing about whether Beijing can contain the financial risks from an explosive growth in debt fuelled by years of government stimulus.

A cooling housing market and painful structural reforms, as well as pressure on exports if Trump fulfils his protectionist promises, are also key risks for China in 2017.

"Today's China December quarter GDP and other monthly data are unlikely to deviate significantly from expectations," Mr Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note. "Market reaction is also likely to be muted with traders in risk averse mode prior to the Trump (inauguration) speech."

Markets will also be watching Federal Reserve chair Janet Yellen's speech in California, starting at 9am Singapore time, for new clues on the likely pace and timing of Fed rate hikes this year.

The 10-year US Treasury yield was unchanged at 2.472, after spiking to as high as 2.496 on Thursday, amid wariness about whether Mr Trump will deliver on his pro-business promises, including tax cuts, fiscal stimulus and looser regulation kept investors on the sidelines.

The dollar was flat after surrendering most of the gains it made on Thursday on upbeat data pointing to the economy's brightening prospects.

US homebuilding rebounded sharply in December amid stronger demand for rental housing, and the number of Americans filing for unemployment benefits fell to close to the 43-year low touched in mid-November.

The dollar climbed 0.2 per cent to 115.02 yen. On Thursday, it surged as much as 0.8 per cent before closing less than 0.2 per cent higher at 114.82 yen.

The dollar index, which tracks the greenback against a basket of six major global peers, was little changed at 101.18 on Friday after paring a 0.8 per cent gain to close up 0.2 per cent.

US stocks were also restrained, with the major indexes posting losses of as much as 0.4 per cent, and the Dow Jones Industrial Average down for its fourth straight session.

"There's been a lot of positive news priced into the market so it's taking a break on the equities side," said Wade Balliet, chief investment strategist of the Bank of the West in Denver.

Investors are "getting nervous trying to piece together what the policies will be," he said.

The euro erased losses made after European Central Bank chief Mario Draghi played down a recent rise in euro zone inflation, as investors parsed his statement and noted he had announced no changes to policy.

The common currency was steady on Friday at US$1.06595 . It dropped as much as 0.4 per cent on Thursday, before retracing its steps to close 0.3 per cent higher.

In commodities, oil rose after the International Energy Agency said oil markets had been tightening even more as cuts agreed by producers took effect. Still, gains were tempered by concerns about swelling US inventories.

US crude added 0.2 per cent to US$51.52 per barrel, pulling further away from Wednesday's one-week low.

Spot gold was steady at US$1,204.32 an ounce, retaining its slight gains from Thursday.