Shares have opened lower, pulled down by the big banks as the Trump trade of the past months shows more signs of unwinding.
The ASX is down 0.3 per cent at 5752, which would put it on track for a minimal weekly loss.
The big four banks are all down around 0.55 per cent, following slides in financials on Wall Street overnight.
Wesfarmers is extending yesterday's slump, falling another 1 per cent, while BHP continues to climb, adding another 0.3 per cent.
Energy stocks are among the winners, rising 0.2 per cent, with Origin up 1.15 per cent.
Meanwhile, the pain continues for Bellamy's investors, as the shares slide another 6.6 per cent, following the rout of the past two days, or since the stock resumed trading following its five-week suspension.
Investors are likely to remain cautious ahead of Chinese trade data out later today, says CMC chief market strategist Michael McCarthy.
"The release of trade data from China today offers an ominous echo of last January's rout," he says.
In 2016 weak China imports and exports sparked fears that drove major indices down by more than 10 per cent.
"Thankfully for investors, expectations are muted, with a consensus estimate of a 3 per cent lift in imports offsetting a 4 per cent fall in exports. Any significant divergence will likely move markets."
Gold surged above $US1200 an ounce overnight to its highest in seven weeks as the US dollar continued to fall after US President-elect Donald Trump's long-awaited news conference gave few details on economic policy.
But analysts warned that gold's revival since mid-December may be running out of steam as the greenback was likely to rebound once Trump moves ahead with his economic plans. Spot gold is currently at $US1195 an ounce, or roughly where it was in late Asian trade yesterday, but it touched $US1206.98 overnight, its highest since November 23.
Trump delivered a wide-ranging briefing on Wednesday that lasted longer than expected but contained no details on tax cuts and infrastructure spending, analysts said. That sent the US dollar index sliding to the lowest in nearly five weeks.
"It's a mess frankly, which is a reflection of the fact that there's no clarity on US economic policy," said Tom Kendall, head of precious metals strategy at ICBC Standard Bank. "For the time being, I'm sticking to my thesis that this move can go a bit further, but we're running out of steam."
Gold is up around 7 per cent since hitting a 10-1/2-month low on December15.
"Despite moving back to $US1200 per ounce, we see no lasting recovery for gold," said Carsten Menke, commodities research analyst at Julius Baer in Switzerland. "The market lacked support from physical buying ... which we believe is a precondition for a lasting recovery."
The outlook for US. rates may become a little clearer when Federal Reserve chair Janet Yellen appears at a webcast town hall meeting with educators later this morning.
"Trump's election has introduced a proliferation of unknowns, which the market will have to work through as they surface," RBC Capital Markets said in a note. "Overall, while we are cautiously optimistic on gold for the year, we still think the real reason to buy gold is as a risk overlay - a hedge against moves like these."
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US earnings season kicks off tonight, IG's Chris Weston writes:
The US Q4 earnings season really kicks into gear tonight, with Bank of America and JPMorgan starting the proceedings. The US financials space will get attention above all other sectors this earning season. Not just because the analysts' consensus is for earnings-per-share growth of 21.5%, but because for those more macro-focused traders, what CEO's say about the potential for a further boost to net interest income (from a steeper yield curve) from potential fiscal stimulus matters.
The fact that all of the big US banks have moved in unison since Trump became president-elect tells you the banks are simply being used as a vehicle to trade the reflation thematic. So, rather than select one bank my preference has been to focus on the sector, which we can do easily through the KBE ETF (SPDR S&P Bank ETF). It's interesting that despite a pullback in US treasury yields of late the US banks have held firm and we can see the KBE has simply traded in range of $44.56 to $42.83 in the last 23 trading sessions. I am happy to trade a break-out either side of this range, and this will tell me everything I need to know about how traders read earnings. The probability (given the strong trend higher from September to December) is that the banks break to the upside, but patience is required.
The big talking point remains whether US fixed income yields will continue to fall, which in turn will pull down the USD and hold implications for markets like precious metals, which are really just a slave to other markets. It's interesting that the US 10-year treasury is holding key support at 2.28%, and in fact we have seen sellers start to creep into price and that is supporting the USD from moving down too aggressively. In my opinion 2.28% (on the US 10-year treasury) is the key line in the sand, so for those who think the Trump train has derailed should watch moves from here and a break of 2.28% suggests the market is warming to that view.
The Australian dollar has continued to rally amid further weakness in the greenback, following disappointment that US President-elect Donald Trump in his much anticipated press conference failed to provide details on fiscal policies that were expected to bolster the economy.
The local currency bounced to a one-month high of US75.19¢ overnight and is currently fetching US74.84¢, on track for a 2.5 per cent rise this week.
Markets have been on a dream run since the US election, trading on the the idea of a huge Trump fiscal stimulus boosting growth and inflation, NAB economist Tapas Strickland says.
"Now with inauguration just a week away, markets are asking 'is it real'? he says. "Some hint of that was gleaned in Trump's press conference on Wednesday (night) where he provided little in the way of policy detail. That saw a rally in US Treasuries and a fall in the US dollar which continued overnight.
The greenback hit a five-week trough against a basket of major currencies and was on track for its worst week since November. The dollar index, which measures the greenback against six major currencies, last traded down 0.4 per cent at 101.38. The dollar also slid to a five-week low versus the yen and last traded down 0.7 per cent at 114.64 yen .
The President-elect's lack of policy detail put safety plays such as bonds and gold back in favour. The retreating US dollar also brought relief for Brexit-bruised sterling and Turkey's lira.
Speculators had driven the US dollar index to a one-week high Wednesday in anticipation that Trump's first news conference since his November 8 victory would give more detail on new fiscal spending and tax measures to repatriate US corporate capital held overseas.
Instead, the event was dominated by debate over Russian hacking and unsubstantiated claims that he had been caught in a compromising position in Moscow.
The dollar index had gained 4 per cent between Trump's election victory and Wednesday on expectations that his promised policies would boost inflation and encourage the Federal Reserve to raise interest rates.
Here's the overnight scoreboard of major markets:
- SPI futures up 7 points to 5735
- AUD +0.7% to 74.91 US cents (overnight range: 74.30 to 75.19)
- On Wall St, Dow -0.3%, S&P 500 -0.2%, Nasdaq -0.3%
- In New York, BHP +0.9%, Rio +1%
- In Europe, Stoxx 50 -0.6%, FTSE +0.03%, CAC -0.5%, DAX -1.1%
- Spot gold +0.7% to $US1199.33 an ounce (earlier $US1207.07)
- Brent crude +1.8% to $US56.08 a barrel
- Iron ore +0.7% to $US80.99 a tonne
- Thermal coal +0.8% to $US82.2
- Coking coal flat $US195
- LME aluminium +1.8% to $US1790 a tonne
- LME copper +2.2% to $US5842 a tonne
- 10-year bond yield: US 2.36%; Germany 0.31%; Australia 2.66%
The three major US stock indexes closed lower as investors waited for fourth-quarter corporate earnings and details of US President-elect Donald Trump's economic policy eight days ahead of his inauguration.
While stocks pared losses as the session wore on, all but four of the S&P 500's 11 sectors ended lower, with financials leading the decline a day ahead of the first major earnings reports in that sector. The S&P had risen 6.4 per cent since the November 8 election.
Trump on Wednesday dashed investor hopes for new details on his policy plans in his first news conference since the election, instead lashing out at US spy agencies and media companies for what he called a "phony" Russia dossier and repeated promises to reform healthcare policies.
On top of policy uncertainty, the market is missing stock buyback support in the quiet period ahead of earnings and individuals are putting more money into bonds than stocks, according to Jeffrey Kleintop, chief global investment strategist at Charles Schwab.
"Companies can't buy shares, and individuals all of a sudden stopped buying since the election. That could be the reason we're seeing a little bit of a gap down today," said Kleintop, but the dip could be temporary if earnings beat expectations.
Kleintop cited Investment Company Institute's data on Wednesday showing the biggest cash flows to bond funds from stock funds since the election.
The Dow Jones Industrial Average fell 63.28 points, or 0.32 per cent, to close at 19,891, the S&P 500 dropped 4.88 points, or 0.21 per cent, to 2,270.44 and the Nasdaq Composite dipped 16.16 points, or 0.29 per cent, to 5,547.49.
The S&P had fallen as much as 0.9 per cent earlier in the session, and its financial index finished off 0.74 per cent, as yields on long-dated bonds fell.
Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Mass. said the stock market's continued proximity to its post-election peak was a positive sign.
"The fact we're still bouncing along the ceiling means to me that everybody's still pretty optimistic," said McMillan.
"The population is confident. They're willing to spend and they're making more money and able to spend. That's good news," he said.
JPMorgan Chase was one of the biggest drags on the S&P 500 the day before its earnings report was due, losing nearly 1 per cent.
Good morning and welcome to the Markets Live blog for Friday.
Your editor today is Jens Meyer - please send any tips, suggestions, feedback, jokes, criticism, praise to jmeyer@fairfaxmedia.com.au
This blog is not intended as investment advice.
Fairfax Media with wires.
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