That;s all for today, and the week - thanks everyone fore reading this blog and posting your comments.
We'll be back Monday from 9am.
Have a good weekend.
Shares started into the first week of 2017 as they finished last year: with strong gains.
Despite lacklustre sessions on Wall Street, where investors seemed to have put the Trump rally on hold for now, the local S&P/ASX 200 index added 1.6 per cent over the week to finish at 5755.6 points, its highest close since late May 2015.
Trade on Friday was a bit more subdued, with the ASX ending flat as investors took a cautious stance ahead of the closely-watched December US jobs report due out later in the day.
"A lot of good news has already been priced into sharemarkets," said Stephen Halmarick, chief economist at Colonial First State. "There is the risk of some fallback", if Donald Trump doesn't live up to the lofty expectations following his inauguration as US president on January 20.
There were some signs of a reversal of the so-called Trump trade on Wall Street, as the US dollar came under pressure while bonds rallied and stocks took a breather.
Still, most local sectors ended the week higher, led by a 3.5 per cent rise in telcos thanks to four straight session of gains in Telstra, which lifted by more than 3 per cent over the week to a four-month high of $5.26.
The big banks did most of the heavy lifting on the benchmark index, led by a 3.2 per cent rise in ANZ, but the other three also all gained more than 2 per cent over the week.
Gold stocks enjoyed another strong week, as the precious metal's price hit a one-month high of $US1185 an ounce on Thursday, benefiting from selling in the US dollar and lower bond yields.
The All Ordinaries gold index climbed 4.6 per cent over the week to hit a two-month high on Friday, with Northern Star Resources climbing 6.6 per cent, Regis Resources adding 4.4 per cent and Ramelius Resources rallying 24 per cent, while Newcrest Mining, Australia's biggest gold miner, added just 2.6 per cent.
The week's gains have placed gold stock into a bull market - conventionally defined as a 20 per cent rise - as the index has risen a whopping 27 per cent since mid-December.
"The best performing stocks are usually a good place to look for shorts," Ben McGarry of Sydney-based hedge fund Totus Capital says.
That puts the likes of Domino's Pizza and Corporate Travel Management in his sights.
Another high-conviction short for Totus is sandalwood firm TFS.
"The company has been promising strong cash flows for many years so this had better be the year it delivers."
Totus has also identified Telstra as a short on the basis of its yield sensitivity, and the "growth hole" after the NBN.
Totus is also bearish on software firms Aconex and MYOB because of their high price-to-earnings multiples and more aggressive accounting. The fund is also positioned for a slowdown in the Brisbane apartment market.
Another hedge fund canvassed by The Australian Financial Review that preferred to remain unnamed said MYOB was its most compelling short position.
This was because there was a large overhang of private equity ownership, an indebted balance sheet of two to three times net debt to EBITDA, and a relatively expensive valuation of 15 times earnings. The unnamed fund also said MYOB's competitor Xero was winning 70 per cent of incremental new business in Australia.
Josh Best of Sydney based KIS Capital says prime short targets are interest rate-sensitive stocks such as REITs, utilities and infrastructure, which have rebounded strongly from the November lows.
A more interesting short that KIS is advocating is Caltex, which it says may be the first casualty of the electric vehicle.
Given 85 per cent of Caltex earnings are from fuel-related sales and refining margins, "even the smallest level of electric vehicle penetration would have a material impact on earnings," the fund wrote on its website in October.
Andrew Macken of global long-short fund Montaka Global is expecting many of 2016's winners will be the losers of 2017.
One may be Bendigo and Adelaide Bank, which has soared more than 60 per cent over the last nine months. He points out that all of Bendigo's earnings growth has been driven by "the effect of higher property prices on the valuation of its Homesafe portfolio". This product allows Bendigo to share in the benefits of rising property prices with the mortgagee.
"Naturally, should property prices stop rising, then Bendigo's earnings growth will face a substantial headwind."
With the advent of Trump, the year ahead promises higher hopes of a boom as well as of a bust, writes one of your Eds:
That the incoming Trump administration will be business-friendly is assured, especially given Republicans will control both houses of Congress. This carries short-term opportunities but long-term risks.
For an upbeat take, look no further than Ray Dalio, chairman and chief investment officer (and borderline cult leader) of the world's biggest hedge fund, Bridgewater Associates. His research shows that the incoming Trump administration has a combined 83 years of executive business experience, the highest over a period looking back to John F Kennedy in 1961. In contrast, Ronald Reagan's team, with whom Trump is often generously compared, had only 45 years.
This is cause for much excitement, reckons Dalio.
"By and large, deal-maker businessmen will be running the government," he writes. It's a move away from left-leaning government types to "bold" profit-driven, pin-striped types. And if the "ideological shift" from treating businessmen as "heroes" rather than "villains" can ignite the long elusive animal spirits in corporate America, then the stimulus will extend beyond tax cuts and fiscal spending.
"If this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays [investors] virtually nothing) to risk-on investments could be huge," Dalio says. As to whether Trump's team will be "aggressive and reckless" or "aggressive and thoughtful", he adds: "We are pretty sure that it won't take long to find out".
Citi strategists note that "much is expected" from the next US government, and worry that "President Trump's effectiveness is far from assured".
"For one thing, Congress, despite being Republican, may provide a check. So if it turns out that Trump is the new Berlusconi, not the new Thatcher, then financial markets may have jumped the gun."
The idea of an American Berlusconi should be enough to give most investors pause for thought, at least over the longer run. The former Italian prime minister was premier on and off three times between 1994 and 2009. He also swept into power as a rich businessman prepared to shake up a lethargic system and spark growth. He failed. The Economist titled a 2011 retrospective article on Berlusconi as "The man who screwed an entire country".
In this vein, academic research from the National Bureau of Academic Research (NBER) in the US shows how the extensive business ties of Donald Trump and his offsiders may have some unwelcome results and undermine faith in American democracy.
Watch out for the unexpected in commodities in 2017. Barclays said raw materials markets from energy to metals face the high likelihood of disruptions, giving a laundry list of possible threats including a default by Venezuela, riots in Chile and a trade war with China.
"The new politics of populism and protectionist trade policies have the potential to disrupt global supply and demand assumptions for various commodities," analysts Michael Cohen and Dane Davis write in a report. "We see risks skewed to the upside in 2017, based on a high likelihood of disruption risk."
Commodities advanced in 2016 to post the first annual gain since 2010 as energy markets rebounded and investors reacted to unexpected political events including Donald Trump's election win in the US and Britain's vote to quit the European Union. Barclays said that the markets will surprise in some fashion this year, and the bank's analysis illustrated the key point that politics are likely to matter just as much as economics.
"Commodity market black swan events come in many forms, and the market may take years or an instant to price them in," the analysts wrote, defining them as extreme events or dynamics that market participants aren't currently pricing in. "China, Russia, the Middle East and Turkey are likely to surprise the commodity complex in 2017."
The bank listed more than a dozen potential black swan events, dividing them into threats to supply, such as a loss of oil output in Venezuela after a default, and threats to demand, such as an unexpected slowdown in China's economy. There were also what it termed threats to transit, with risks to the supply routes that are vital to the flow of raw materials, such as the South China Sea.
Relations between the US and Iran came at the head of Barclays's list, with the bank seeing a potential escalation in rhetoric between the two countries amid Trump's stated desire to overturn the recent nuclear agreement. The 2015 accord, signed between Iran and six powers including the US, brought the lifting of key economic sanctions.
"It should come as no surprise that Trump's pledge to dismantle the Iran nuclear deal ranks as one of the most significantly bullish risks towards oil markets this year," it said. Still, "we think his approach will moderate from campaign rhetoric."
Just as the yuan posts a record biggest two-day rise, Goldman Sachs turns bearish on the cuirrency.
Goldman, home to the team that conceived the BRIC framework for investing in the largest emerging markets, is urging investors to "stay the course" with bets on the currencies of Brazil, Russia and India, along with South Africa.
When it comes to China, Goldman anticipates a "grinding" move lower for the yuan this year, "analogous to 2016".
Goldman emerging-market strategists led by Kamakshya Trivedi predicted in a note the yuan will retreat to 7.3 per US dollar by year-end, more bearish than the 7.16 median forecast in a Bloomberg survey. It's currently at 6.83.
China, South Korea and other Asian economies are vulnerable to US President-elect Donald Trump's protectionist election manifesto translating into policy and regulatory action. By contrast, Brazil, Russia, India and South Africa are less at risk, Goldman analysts reckon.
"Mapping US 'swing state' job losses with emerging-market-US. trade flows suggests that these 'good carry' candidates appear less likely to face US import restrictions because their exports compete less directly with US labour," the Goldman analysts write.
The analysts cited improving balance of payments, falling paths for inflation, attractive real yields and prospects for stronger growth this year in the four big emerging markets they favour.
"Preferred emerging-market longs can be funded out of non-Japan Asia low-yielders (South Korean won, Singapore dollar, Malaysian ringgit) or in non-dollar developed markets (euro, yen, pound)," they say.
China's yuan could potentially fall further than 7.3 per US dollar by year-end, Goldman said. Accelerated capital outflows, or depreciation carried out as a policy response to Trump protectionism, are among the risk scenarios.
"The best times to gain exposure to dollar-yuan weakness have tended to be when China concerns were off radar screens, or after periodic interventions that flushed out bearish speculative positions and provided attractive entry points," the Goldman analysts wrote. "That remains our view today."
Hot on the heels of the November trade numbers, December iron ore shipments to China from WA's Port Hedland terminal hit a record 37.4 million tonnes in December, boosted as users such as BHP and Fortescue ramped up production.
Overall shipments from the world's biggest iron ore export terminal also climbed to a record 43.9 million tonnes last month, according to the Pilbara Ports Authority.
The previous record for iron ore exports to China was 35.5 million tonnes, while the overall record was 42.9 million tonnes. Both were set last August.
"We saw records in both categories in December," a port spokesman said. "It was a very active month."
Iron ore prices soared 80 per cent in 2016 as economic stimulus in China helped sustain steel output. China imports the vast majority of the world's sea-traded iron ore.
Compared to November, December shipments were up 11 per cent to China and 7 per cent overall, port figures showed.
Analysts expect both BHP and Fortescue to report near-record quarterly production figures later this month.
But while miners made hay while the sun shone in December, the fast finish can't hide the fact that iron ore export growth from Australia is slowing.
Just over 478 million tonnes of iron ore was shipped from Port Hedland during 2016, a total which was just 7.3 per cent higher than the previous year.
The 446.2 million tonnes shipped from Port Hedland in 2015 was 7.9 per cent higher than 2014's export volumes, which were 30.1 per cent higher than the 2013 export tally of 317.93 tonnes.
Exports in 2013 were 25.2 per cent higher than 2012 export volumes.
China's central bank has strengthened its currency fixing by the most since a peg to the greenback was dismantled in July 2005, following a tumble in the US dollar.
The People's Bank of China raised the reference rate by 0.92 percent to 6.8668 per US dollar, following a 1 per cent drop in a gauge of the greenback's strength. The offshore yuan slumped 0.7 per cent, the most since June last year, after the fixing.
"This is a technical move in the dollar, and the PBoC took advantage," said Irene Cheung, a foreign-exchange strategist at ANZ.
The yuan traded in Hong Kong has surged 2.5 per cent in the last two days, the most in data going back to 2010, after interbank borrowing rates spiked amid reports that policy makers are preparing contingency plans to support the exchange rate. This widened the offshore yuan's premium to the onshore rate.
"The past few days have seen good opportunities for corporates to arbitrage the offshore-onshore gap and we are likely witnessing the unwinding of those arbitrage trades today, pushing the offshore currency weaker," said Fiona Lim, a senior currency strategist at Malayan Banking. "The fixing is a clear signal from the PBoC that they do not favour speculation."
The week's first major downer was the report released by the Institute of International Finance, which found global debt levels rose to 325 per cent of the world's gross domestic product last year, boosted by higher government borrowing.
According to the IIF report, global debt jumped more than $US11 trillion in the first nine months of 2016 to a new record high of more than $US217 trillion. In a worrying development, government borrowing accounted for nearly half of the total increase.
Even more concerning is that this surge in global debt levels comes at a time when borrowing costs – for governments, companies and individuals – are rising sharply.
As US hedge fund manager, Kyle Bass, the founder of Hayman Capital, pointed out in his latest investor newsletter, there is now a huge question confronting markets: "What happens to economies at maximum leverage when interest rates begin to rise?"
Bass, who established his reputation by betting against subprime mortgages ahead of the 2008 financial crisis and who last year became extremely bearish on China, told investors that global markets were at the early stages of "a tectonic shift from deflationary to reflationary expectations".
He wrote that "as we enter 2017, we believe enormous macro imbalances are just beginning to unwind".
For several years, the investment environment has been extremely challenging because "economic gravity has been pulling one way and central banks have been using aggressive monetary policy to pull the other".
But this is now changing. "From here on, we expect to encounter significant changes in global fiscal policies along with a continuation of the upward movement of general price levels for consumers and producers alike."
He predicted this would result in a world with "higher global inflation, tepid real economic growth, and severe imbalances in select Asian financial systems and currency markets".
Shares of Toyota dropped more than 3 per cent after US President-elect Donald Trump threatened to impose heavy taxes on the automaker if it builds its Corolla cars for the US market at a plant in Mexico.
Toyota dropped as much as 3.1 per cent to 6830 yen in early trade before paring losses, after Trump's tweet.
Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.
— Donald J. Trump (@realDonaldTrump) January 5, 2017
The tweet was Trump's first broadside against a foreign car maker. He has slammed automakers in the US for building cars in lower-cost factories south of the border, which he said costs American jobs.
This week Ford scrapped plans to build a $US1.6 billion assembly plant in Mexico after Trump criticised the investment.
Trump's tweet confused Toyota's existing Baja plant with the planned $US1 billion plant in Guanajuato, where construction got under way in November. Baja produces around 100,000 pickup trucks and truck beds annually, including the Tacoma pick-up truck. In September, Toyota said it would increase output of pick-up trucks by more than 60,000 units annually.
The Guanajuato plant will build Corollas and have an annual capacity of 200,000 when it comes online in 2019, shifting production of the small car from Canada.
Other Japanese car makers too have plants in Mexico. Nissan has two facilities, producing 830,000 units in the year to March. Honda operates two assembly and engine plants in Mexico with a total annual capacity of 263,000 vehicles. It also operates a transmission plant with an annual capacity of 350,000 units.
Other Japanese carmakers also fell in early trade, with a stronger yen dragging on prices too. Honda fell more than 2 per cent before paring losses, while Nissan also shed 2 per cent, underperforming the broad Topix index.
The huge swing in the trade balance won't boost GDP growth as the surplus comes courtesy of increases in commodity prices, not export volumes, Capital Economics says.
In November, the 8.4 per cent leap in export values was mainly due to an 11 per cent gain in iron ore exports, a 26 per cent leap in coal exports and a 22 per cent rebound in meat exports.
Coking coal export volumes did rise by 12 per cent over the month, but thermal coal and iron ore export volumes rose by just 1 per cent.
But GDP - which shrunk 0.5 per cent in the third quarter - measures volumes not prices, and economist Paul Dales reckons it's likely net exports were actually a large drag on real GDP in the fourth quarter.
"The upshot is that the rise in commodity prices that has generated the trade surplus has not resulted in much higher export volumes, and that's crucial for real GDP growth."
Dales estimates that export volumes fell by around 3 per cent in the fourth quarter as a whole, with net exports subtracting around 0.8 percentage points in the fourth quarter.
"The economy will probably escape a recession (two consecutive falls in GDP), but only just," he predicts.
The surplus is here! In the trade balance, that is.
A massive rise in coal and iron ore export values helped Australia swing to a trade surplus in November, the first since March 2014.
Merchandise exports +$1.9 billion in Nov, big gains for iron ore (+$0.55bn), coal (+$0.85bn) & LNG (+$0.2bn for a record month) #ausbiz pic.twitter.com/IPLfqhPra0
— Pete Wargent (@PeteWargent) January 6, 2017
The surplus of international good and services was $1.2 billion in the month, following a deficit of $500 million in October. The market had expected a deficit of $500 million.
While imports were flat, exports surged more than 8 per cent in November, with non- rural goods - specifically coal and iron ores - the main drivers.
Coal, coke and briquettes exports bounded by $923 million, or 26 per cent, to $4.5 billion. Exports of metal ores and minerals exports leapt by $687 million, or 11 per cent, to $6.8 billion. Exports of rural goods, including cotton, butter, cheese and skim milk powder, and meat and meat preparations also rose by more than 20 per cent in November.
November's barnstormer ended a 31-month run of deficits and is likely just a taster of more to come as prices for many key resources remain strong on the back of sustained Chinese demand.
The RBA's index of commodity prices, which mirrors the country's resource mix, surged 11.8 per cent in November and another 9.3 per cent in December.
As well as the improvement in November, the trade balance was revised up by a cumulative $3.9 billion in the previous nine months of last year. It seems the external sector has performed much better than most economists thought.
The Aussie dollar, however, has shrugged off the strong data, and is trading at $US73.33¢, about two-tenths of a cent below an early high this morning.
A dramatic rally in digital currency bitcoin came to a spectacular end overnight with a plunge of up to 20 per cent as China's yuan rose sharply - further evidence of an intriguing inverse relationship between the pair.
Bitcoin had gained more than 40 per cent in two weeks to hit a three-year high of $US1161.88 early yesterday, before it dived as low as $US888.99 during the session as the yuan jumped by over 1 per cent in offshore trading and headed for its strongest two-day performance on record. It's currently recovered back to just below $US1000.
Chinese exchanges have reported high volumes of trading of the web-based "cryptocurrency" over the past year, during which time the yuan has shed almost 7 per cent, its worst annual performance since 1994, while bitcoin has surged 125 per cent, outperforming all other currencies for a second year in a row.
Bitcoin can be used for moving money across the globe quickly and anonymously, and operates outside the control of any central authority. That makes it attractive to those wanting to get around capital controls, such as in China, and also to investors who are worried about a devaluation in their currency.
"Given that the yuan's weakness over recent months seemed to correlate with bitcoin's strength more than any other currency, it's no surprise that bitcoin traders have reacted the way they have to the yuan's sudden strength today," said Paul Gordon, co-founder of London-based Quantave, a firm seeking to make it easier for investors to access digital currency exchanges.
Exchanges in China say they account for more than 90 per cent of global bitcoin trading, which would help explain why a shift in Chinese demand would sharply affect the price.
But many bitcoin experts say Chinese exchanges overstate their volumes in the digital currency, and attribute sharp moves to speculation by, for example, US-based hedge funds.
Some said bitcoin's fall was a natural reaction to the speed of its previous rise. It is still up more than 50 per cent on three months ago, when it was trading at around $US600.
"If something goes up very rapidly ... people make a lot of money, and at some point they're going to want to sell, in order to realise their gains," said Marco Streng, CEO of bitcoin mining and trading firm Genesis Mining.
Shares in Ardent Leisure have plunged as much as 7 per cent after the Dreamworld operator said revenue at its reopened Gold Coast theme parks was down 63 per cent on the same period a year ago following the October ride accident that killed four people.
Ardent said that revenue at Dreamworld and Whitewater World was just $3.66 million for the three weeks to December 31, compared to $9.89 million for the prior corresponding period.
Ardent said in a statement that the gradual reopening of Dreamworld's thrill rides was to blame for lower attendance and revenue, adding that overall guest sentiment had been very positive."
The theme parks reopened on December 10, six weeks after Kate Goodchild, Luke Dorsett, Roozi Araghi and Cindy Low were killed when Dreamworld's Thunder River Rapids Ride malfunctioned.
Shares are currently down 2.5 per cent at $2.185. They are about 17.5 per cent lower than before the accident.
Shares have opened marginally higher, extending a remarkable start of the year for the local bourse.
The ASX is up 0.1 per cent at 5756.5, on track for a more than 1.6 per cent weekly gain.
"At this stage, stock markets appear to be holding the line despite the correction of the post US election moves in the US dollar and bond markets that is now well and truly under way," says CMC chief market analyst Ric Spooner.
Gains in miners and energy stocks are being offset by losses in financials.
BHP is the biggest tailwind for the market this morning, rising 0.5 per cent, followed by Telstra, also up 0.5 per cent.
The big banks have all opened slightly lower, led by NAB, down 0.4 per cent.
SPONSORED POST
The wheels are starting to fall off the Trump reflation trade, says IG analyst Chris Weston:
The Trump trade of being long the USD and financials, short US fixed income and precious metals is being unwound fairly rapidly and I suspect there is more juice in this trade. The Fed have suggested upside risks to their forecasts yesterday's set of released minutes, but the checklist of things that genuinely need to go right to achieve the strong inflation forces many had positioned for is being fully assessed. Traders are banking profits and with it one can look at ways to join the growing trend.
I have been looking at long platinum trades of late, predominantly based on strong seasonal factors we see in January (platinum is up 15 of the last 17 Januarys) and price is now pushing into my initial target of $US1000 to $US1020 and the November highs. I wouldn't be overly surprised if price pushes even higher. Gold clearly has its eye on a move into $US1200 and gold stocks should find some love in Australia today and names like NCM look really bullish on the daily chart.
The USD has been sold aggressively overnight, falling 1.2% and breaking the bottom of its recent consolidation range. This has largely been driven by fairly strong buying in the US fixed income market with five and ten-year treasury yields falling six basis points apiece. Put the TLT ETF (iShares 20+ Treasury bond) on the radar as this is a good way for traders to trade the US fixed income market.
On the equity front and we have seen tepid selling in US markets and we are facing another subdued open in Australia. BHP's ADR is up 0.9%, while some support should be seen in the financials space. The Nikkei 225 is still holding the recent highs, which is surprising, but if USD/JPY continues to move lower then we will see better downside to this much loved market. One for the radar and specifically if we see a close below the 29 December swing of 18,941 then one could look at short positions here.
China remains a key focus, but not so much for moves in the equity market; all eyes have been on huge short covering in CNH (China's offshore yuan) – sell rallies in USD/CNH from here. One suspects with the broad weakness seen in the USD we should see a far stronger CNY when the PBoC 'fix' the USD/CNY mid-point at 12:15 AEDT today.
In terms of event risk, we have Aussie trade data at 11:30 AEDT with the market expecting a strong narrowing in the trade deficit to $550m. I wouldn't expect too much of a reaction in the AUD from this print. The bigger issue is the US non-farm payrolls.
For yuan bears, it's the worst kind of deja vu.
As China's currency posts a record two-day rally offshore and skyrocketing interbank rates make short positions prohibitively expensive, memories of an epic squeeze last January are rushing back to bearish traders. The abrupt market reversal almost exactly a year ago marked the beginning of a nearly 5 per cent rally that lasted two months.
"Another extraordinary day in China," said Gareth Berry, a foreign-exchange and rates strategist at Macquarie Bank. "It looks like a classic case of a consensus trade blowing up at the start of a new year."
The turbulence represents the latest twist in a battle between China bears - who say slowing economic growth makes a devaluation inevitable - and policy makers fearing a sudden drop will destabilise the financial system. Pessimists have mostly been on the right side of the trade since a one-time exchange rate adjustment in August 2015, but sudden bouts of strength have proven painful for short sellers who need to periodically roll over their bets.
Derivatives markets show the extent to which some speculators were caught off guard. The extra cost of bearish options over bullish contracts posted its biggest three-day drop since May 2014, according to three-month risk reversal prices compiled by Bloomberg.
The onshore yuan gained 0.7 per cent to 6.8830 per US dollar in Shanghai, while the rate in Hong Kong extended its two-day advance to 2.5 per cent. The city's overnight deposit rate touched a record 100 per cent, while the spread between the offshore and onshore exchange rates reached the widest since 2010.
"It's painful to sit on short yuan positions now, given the soaring funding costs," said Sim Moh Siong, a currency strategist at Bank of Singapore.
NAB says bears are unlikely to see a major reprieve any time soon as authorities keep tight control of the yuan before this month's inauguration of US President-elect Donald Trump.
Here's the overview of the main overnight action:
- SPI futures up 9 points or 0.2% to 5725
- AUD +0.8% to 73.40 US cents (overnight range 72.73-73.57)
- On Wall St, Dow -0.4%, S&P 500 -0.3%, Nasdaq +0.1%
- In New York, BHP +0.9%, Rio +0.3%
- In Europe, Stoxx 50 flat, FTSE +0.1%, CAC flat, DAX flat
- Spot gold +1.6% to $US1182.78 an ounce
- Brent crude +0.1% to $US56.50 a barrel
- Iron ore +2.2% to $US78.93 a tonne
- Thermal coal: -3.3% to $US85.7 a tonne; coking coal: -5% to $US213.8
- LME aluminium +1% to $US1702 a tonne
- LME copper -1.2% to $US5580 a tonne
- 10-year bond yield: US 2.35%; Germany 0.24%; Australia 2.68%
The Nasdaq squeaked out a record high close overnight thanks to Amazon, while deep drops in Macy's, Kohl's and other department stores weighed on the broader stock market.
US stocks have wavered over the past three weeks following a strong surge in the wake of the November election, with investors expecting President-elect Donald Trump to stimulate the economy through tax cuts and infrastructure spending.
Many on Wall Street want evidence that his campaign-trail promises will be approved by Republican lawmakers and come to fruition.
"The market is pausing for a reason, it's waiting for confirmation from Washington and the Trump agenda," said Jeff Zipper, managing director for investments at Private Client Reserve at US Bank.
Department stores Macy's dropped 13.9 per cent while Kohl's slumped 19 per cent after the companies said their holiday sales fell more than expected. The warnings swept up other department stores in their wake - Nordstrom fell 6.9 per cent and J.C. Penney fell 7.2 per cent.
But online retailer Amazon, which has been luring customers away from department stores, rose 3.1 per cent, helping push the Nasdaq Composite to a record high close.
The Nasdaq Composite rose 0.2 per cent to end at 5487.94, less than 1 point higher than its previous record high close on December 27. The Dow Jones lost 0.2 percent to end at 19,899.29 while the S&P 500 lost 0.1 per cent to 2269.
Adding to downbeat sentiment was the ADP National Employment report, which showed fewer jobs than expected were added in the private sector in December. The report was seen as a hint ahead of Friday's more comprehensive nonfarm payrolls report that includes both private and public sector hiring.
Broadly, the economy is seen by many economists as near full employment, a factor that may help corporate profits - and stock prices - as fourth-quarter earnings season starts in the next few weeks.
"If we get a 5- or 10-per cent pullback here, most people will be buying, because the fundamental backdrop is still pretty good, and getting better. This is probably the best economic environment for a new incoming president in 20 years," said John Canally, chief economic strategist for LPL Financial.
The US dollar has dropped to a three-week low against a basket of major currencies on after US inflation and unemployment data failed to reverse a downtrend that followed some of the biggest gains on record for China's yuan.
A rise in overnight borrowing costs in Hong Kong helped the offshore yuan to its highest rate against the US dollar in nearly two months and the largest two-day rise since its inception in 2010.
That in turn triggered profit-taking on the dollar, which fell to its lowest since December 14 as more investors piled on to the selling.
The dollar index, a measure of the greenback against six world currencies, fell 1.3 per cent to a low of 101.300. It was the worst one-day percentage loss since September 6.
The dollar's steep dive was the result of investors having to reduce or reverse bets on the greenback as momentum shifted in the market, said Deutsche Bank's Global Head of FX Strategy Alan Ruskin.
"If you're looking for any catalyst it was China ... and it turned into a cascade and into a squeeze in a lot of the favoured trades that we started the year with," he said.
The dollar was last down 1.4 per cent against the yen and around 1 per cent lower versus the euro and Swiss franc. The Aussie dollar gained more than 1 per cent to $US73.57¢.
Investors shook off promising data on the US economy, including the Institute for Supply Management's non-manufacturing purchasing managers index, which showed new orders and prices paid at their highest levels since August 2015 and August 2014, respectively.
US jobless claims fell to a 43-year low last week, but that data was countered by a report from payrolls processor ADP showing employment gains were soft in December.
That put the US dollar back on its lower trajectory after a brief stall following the release of the jobless claims figure as investors refocused attention on China's strong yuan.
"All we're seeing is a continuation of the overnight move, which is dollar weakness," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange. "Obviously that's also helped by the significant intervention by the Chinese overnight."
Borthwick also said sentiment was growing among investors that the US dollar's strength has peaked as many return to markets after the Christmas and New Year holidays.
Search pagination
1 new post(s) available. View post(s) Dismiss