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Shares finished the week flat after news of a new tax on the big four banks weighed on the ASX, offset by a welcome recovery in resources names as the oil price stabilised.
Over the week, mining stocks clawed higher, followed closely by energy and consumer staples, while the big lenders and listed property names lagged behind.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each slipped 0.7 per cent on Friday to 5836.9 points and 5870.9 points respectively. Over the week, the ASX 200 and the All Ords finished flat, climbing a fraction of a point.
"Tuesday's budget looked to be fairly pro-growth which has given investors a reason to buy infrastructure and mining stocks," said Romano Sala Tenna, portfolio manager at Katana Asset Management.
"But the big banks are looking in a bit of trouble, and because they make up around 25 per cent of the market's capitalisation that has been weighing on sentiment. But it's unlikely they will stay depressed for long."
CBA was down 3.2 per cent for the week to $81.67. Westpac fell 3.8 per cent to $32.57 and ANZ was off 4.7 per cent to $29.22, while NAB was off 0.6 per cent to $32.33.
As investors rotated steadily out of the banks, investors look to have decided insurers were offering value. QBE enjoyed a 3.6 per cent lift over the week, IAG was up 1.7 per cent and Suncorp bumped up 1.5 per cent.
Gold shares rose for the fourth day, in line with a gold price enjoying its third day of gains. The yellow metal slumped to an eight-week low on Tuesday before recovering.
Myer was one of the worst performers, and the distaste for retailers spilled over to JB Hi-Fi, which closed down 6.9 per cent and Harvey Norman, which was off 8.3 per cent. A couple of big analyst downgrades over the week didn't help.
Here's something from one of you Eds, wondering whether at this particular point in history is not the best time to be cracking down on the big banks:
The run rate of new dwellings being built is at multi-decade highs. Clearly, then, the risk is property markets are moving, or have moved, into oversupply.
So what next?
Well, prices of oversupplied goods have to fall. And this is where those much maligned lenders come in. And where government intervention today risks worsening the fallout. Policymakers are hell-bent on restricting lending and slowing credit growth - the lifeblood of the housing market.
And yet how the end of the property cycle plays out "ultimately comes down to bank behaviour", Quay Global Investors portfolio manager Chris Bedingfield says"The whole economy is hostage to four CEOs, essentially."
If the banks are "sensible" and only restrict lending to troubled areas of the market, then credit keeps flowing through the economy.
"If that's the case then I think [the fallout from a property correction] will be very isolated," he says. "We might go through what Sydney went through between 2003 and 2009." That is, prices don't crash but plateau for six or seven years as the excess supply gets worked through the system.
The other, less attractive scenario, is that the banks get nervous about the market overall. Maybe, and perhaps egged on by regulators, they start restricting lending in other, less directly affected zones. It's not just off-the-plan buyers who struggle to get loans; those trying to purchase existing houses also find it harder to get credit.
"Heaven forbid, maybe no-one bids at a Sydney auction! Then you do start to see prices start coming back a bit. Does that spook banks even more? This is the feedback loop, and then it creates a bigger and bigger problem."
Bedingfield is careful to say that he isn't predicting a housing bust. His point is that the risk-return profile of Australian residential property is not an attractive one. For that reason his fund prefers to invest in German and US residential property markets.
"I'm hopeful that common sense will prevail as the market cools. But humans are hard to predict, and you've got to think of different outcomes."
Whichever way it goes, with the risk of a housing correction rising, now may not be the time to be hitting the big banks. You might not like them, but you do need them. Maybe soon, and maybe more than ever.
You lucky, lucky subscribers can read more at the AFR here.
The targeting of BHP Billiton by activist investors has set tongues wagging on whether Australian investors could soon see a rising tide of shareholder activism against the country's cosy corporate oligopolies.
But while some analysts think it's only a matter of time, some fund managers disagree, saying domestic funds aren't big enough to play these types of strategies, nor are they culturally inclined to.
BHP, one of Australia's few true multinational companies, was last month targeted by New York-based Elliot Associates, whose head Paul Singer urged the miner to demerge its petroleum assets and collapse its dual-listed company structure.
Elliot, which has taken a 4.1 per cent stake in BHP, said such a strategy could unlock 48 per cent more value for BHP's Australian shareholders.
Shortly after, Sydney-based hedge fund Tribeca Global Natural Resources called for "significant turnover" on BHP's board.
BHP executives have disputed Elliot's proposal, saying the petroleum division was already being valued by the market.
Local fund managers say the activism on BHP's share register is unusual, and unlikely to be replicated across the broader sharemarket.
"They'll struggle," said Bennelong Australian Equity Partners investment director Julian Beaumont, referring to Elliot's bid to convince BHP shareholders to back its alternate plan. "And I think there's no real general flavour that suggests this type of stuff is going to come through en masse.
"Culturally, I don't think shareholder activism will play a big part here."
Mr Beaumont's comments came at the Bennelong Investor Forum in Melbourne on Wednesday, and were echoed by Kardinia Capital's portfolio manager Mark Burgess, who said it just wasn't the "mentality" of Australian investors to back activist bids.
As a strategy, I think it's a good strategy," he said. "And I think for our market it'd be a good thing if you saw more of it going on."
Dark days loom for retailers as Cyclone Amazon approaches, writes BusinessDay columnist Elizabeth Knight:
The arrival of Amazon will be an existential moment for some retailers and it will almost certainly trigger of wave of industry rationalisation. But it will also have a Darwinian flavour - a test of adaptive skills and survival of the fittest.
Since the US e-commerce giant last month formally announced its intention to expand in Australia, there has been a rash of analysis on the extent of the damage Cyclone Amazon will inflict on the retail sector, most of which has been extrapolated from its arrival in other countries.
For Australian retailers, the entry of Amazon will have a greater effect than the imposition of the goods and services tax or even the more gradual entry of online competitors.
A report from international ratings agency Standard & Poor's in May sums it up, saying "the tide of change that began with internet commerce has built into a tsunami called the Amazon Effect, resulting in bricks and mortar retailers shrinking their physical footprints while focusing on shifting more business online or risking being relegated to the remainder bin of retail history".
But before getting into the financial impact of Amazon, the potential for even the best-managed retailers in Australia to withstand this new competitive force must be viewed in the context of the current headwinds facing the industry.
Within the discretionary sector, conditions are already challenging. A string of disappointing results, particularly from apparel-dependent retailers, and including department stores, is the clearest evidence of the pressure these businesses are under.
Earlier this week, the Australian Bureau of Statistics released its March retail spending bombshell - a 0.1 per cent drop compared with expectations of a 0.3 per cent rise.
Economists expressed various levels of concern, with Citigroup declaring "the retail sector is verging on recession".
The last time New Zealand's population grew this much, the world was reeling from an oil crisis and Richard Nixon's resignation from the White House.
The small nation saw its population surge by 100,300 people in the year to March 31, the biggest nominal increase since European colonisation began in the 1840s, according to Statistics New Zealand. In percentage terms, the 2.1 per cent gain is the largest since 1974, the year the price of oil quadrupled and US President Nixon was forced to resign by the Watergate scandal.
Then as now, New Zealand's isolation, relative safety, natural beauty and political stability make it an attractive destination for migrants, who are driving the population increase. Record immigration added a net 71,900 people in the year through March, while natural population growth contributed 28,300.
"New Zealand is an island of calm in troubled waters," said Shamubeel Eaqub, an independent economist and author at Sense Partners in Auckland. "You've got uncertainty with Trump, with Brexit, the rise of the far right in Europe, pollution in Asia. There's a whole bunch of different drivers that set New Zealand up as a great place to be."
A strong economy is also a drawcard. Economic growth has averaged about 3 per cent a year for the past five years, encouraging New Zealanders to stay put instead of seeking better job opportunities and wages in Australia.
While the rapidly swelling number of inhabitants is helping to sustain economic growth, it is also putting pressure on infrastructure in places like Auckland. The country's largest city, home to a third of New Zealand's 4.8 million people, has seen its average house price surge above NZ$1 million ($930,000) and its roads become congested with traffic.
Snapchat's disappointing user growth in its first results briefing since publicly listing has been costly for a wide range of mutual funds, while short-sellers are estimated to have made $191 million in profits, according to data compiled by the financial analytics firm S3 Partners.
Shares of Snap, parent company of the popular messaging app Snapchat, fell 21.5 percent on Thursday, losing $4.93 to close at $18.05 and wiping out nearly $5.8 billion in market capitalisation. The company, after the market close on Wednesday, reported only modest user growth and revenues that fell short of analysts expectations.
The largest mutual fund investor in Snap, Fidelity's $100 billion-plus Contrafund, listed nearly 10 million Snap shares worth $217.4 million as its main stake in Snap as of March 31, according to the fund's disclosures. Snap's shares on March 31 closed at $22.53. Assuming no changes, that stake would now be worth now around $175 million.
T. Rowe Price's $37 billion Blue Chip Growth Fund owned 1.56 million shares of Snap as of March 31, according to the fund's disclosure of holdings. That $35.3 million stake, based on Snap's March 31 closing price, would now be worth about $28 million.
Meanwhile, short-sellers, who aim to make a profit by selling borrowed shares on the hopes of buying them back at a lower price later and pocketing the difference, are in the money.
A $3-million short bet against Snap was among the AdvisorShares Ranger Equity Bear ETF's top 20 positions as of Wednesday, accounting for 1.75 percent of the fund.
"They got very fortunate in the pricing Wall Street gave them when they went public, but really it's the epitome of a ridiculously priced IPO after a six-year bull market," said co-portfolio manager Brad Lamensdorf. He said the ETF has not reduced its bet against Snap following Thursday's stock selloff and expects the share price to go lower.
Snap went public on March 1 at $17 a share, topping the company's expected range of $14 to $16 a share.
Heading into Snap's earnings announcement on Wednesday, short positions in the company were at 38.65 million shares. Based on Snap's Wednesday closing price of $22.98, the positions were equivalent to about $888.15 million, according to S3 Partners.
"We would anticipate shorts to keep positions open until the stock at least reaches the IPO price of $17, especially since financing costs are less than 1 percent annualised," said Matthew Unterman, director at S3 Partners.
"However, we are seeing rates starting to trend more expensive today," he added.
Asian stocks declined on concern about the appetite of U.S. consumers to keep spending, while bonds and gold held gains.
Consumer discretionary shares led losses on the MSCI Asia Pacific Index as equities retreated in Japan, Australia and South Korea. Worries that Americans continue to hold back from buying goods in the world's largest economy dragged the S&P 500 Index lower on Thursday. Gold maintained an advance while Australian government bonds tracked gains in Treasuries. Oil approached $48 a barrel.
Global equities are trading near a record high amid optimism the economy can weather higher U.S. interest rates. Weak sales at American department stores underscored rising angst that the biggest part of the U.S. economy isn't picking up the pace enough to raise growth rates.??U.S. retail sales data due later Friday will give investors a fresh read on the situation.
Chinese shares are heading for a fifth week of declines as a rout that's erased more than $560 billion from the value of equities makes them the world's worst performers since mid-April.
In Hong Kong, the Hang Seng Index traded flat. China's government has made preparations to support the city's stock market if needed to create a positive atmosphere before July 1, when Xi Jinping is expected to visit for the first time as president to mark 20 years of Chinese rule
The dramatic 30 per cent fall in Myer's share price since the start of the year made it a plum acquisition target, said Citi retail analyst Bryan Raymond in a note published yesterday afternoon.
Yesterday, Myer's third-quarter update revealed same-store sales had slumped 2 per cent, prompting a sizeable sell-off. But Myer investors could soon see some relief, as the department store, currently trading at 95c, is vulnerable to a takeover, Mr Raymond wrote.
"With Myer sitting below a $1 share price, we see increased risk of an acquisition, following Premier Investments' 10.8% stake made at a significant premium to the current share price," the note stated. Premier Investments has said its stake is "strategic" and not linked to takeover intentions.
In light of Myer's tumbling share price, it was raised to a 'buy' at Morningstar yesterday.
But other analysts see more pain ahead. The slow start to the winter selling period increases chances of promotional activity which could pressure margins, Morgan Stanley analysts led by Thomas Kierath wrote yesterday.
Myer's MD Richard Umbers used the third quarter sales release to hit back at some of the pessimism around the stock. "It is really tough out there", he acknowledged, as his chain battled weak consumer spending coupled with the looming threat of Amazon on the horizon. Not that he agreed this was as big a threat as some have assumed.
"There's a new kid on the block and he's a big kid," he said, referring to Amazon. "What isn't clear yet is the nature of their offer here, the timing, the extent of their business distribution.
"So I think it's a fairly bold leap to make some of the conclusions that have been made in the marketplace. "
"There is a vacuum of information about these new players and in the absence of hard, solid facts people draw conclusions on what the impact is going to be."
Investors weren't persuaded. Myer's share price fell 3.5 per cent yesterday and is down another 3.1 per cent today after its third-quarter update, in which it said same-store sales had slumped 2 per cent. Those selloffs came after a 9.5 per cent selloff on Monday, prompted by Credit Suisse slashing its price target on the retailer.
Some of the biggest gainers on the market this morning have been gold stocks, with the All Ords gold index rising 2.7 per cent in early trading.
That caps off the fourth day gold stocks have traded higher. and comes after three days of gains in the gold price, after the yellow metal hit an eight-week low of $1,213.81 an ounce on Tuesday. Spot gold currently sitting around $US1225 in early Asian trading.
"The pullback in U.S. stocks has certainly played its part, as has the risk aversion as the political 'noise' increases yet again in the United States," said Jeffrey Halley, senior market analyst at OANDA. "Gold has also tailgated copper's overnight rally as well.
"The rally has left gold flirting with its 100-day moving average which is just above at $US1225.50. A daily close above here being a constructive technical development. Tonight's U.S. CPI numbers will be a key determinant of how gold finishes the week with a high print most likely taking the wind out of gold's sails as the street prices the odds of a Federal Reserve hike higher for June's meeting and vice versa.
"Intra-day, we would expect Asia to be keen to buy dips ahead of the weekend. Gold has resistance at the 1230 and 1240 regions with the critical support being around 1214.50. A move through the lower level suggesting that a further dip to 1200 could be on the cards.
Shares in Monash IVF are down 3.4 per cent after chief executive and managing director James Thiedeman told the market he was resigning to take up a role at an unlisted healthcare organisation.
The company says Mr Thiedeman, who has led the ASX-listed firm for eight years, has agreed to serve out his six-month notice period to ensure a smooth transition to his replacement.
Mr Thiedeman has consistently led the company to increased profits and earnings through acquisitions and market share expansion after it first listed on the ASX in June 2014.
In the 2016 financial year, Monash's net profit leapt 34.6 per cent to $28.78 million, while revenue also jumped 25.3 per cent to $156.56 million.
Monash chairman Richard Davis thanked Mr Tiedeman for substantially growing the company's domestic footprint, expanding overseas and broadening the scope of its services into women's imaging.
US energy giant ExxonMobil's Australian operation has pointed to "operational cost management challenges" in reporting a $38 million net profit for 2016 and a 2 per cent slide in revenues despite the ramp-up of the huge Gorgon LNG venture in Western Australia.
Sales for 2016 dropped by $173 million to $7.2 billion, Esso Australia said in accounts filed with the corporate regulator, citing "marginally lower average prices" for products sold. Direct operational costs amounted to $2.4 billion, accounting for a third of revenue generated.
"The vast majority of these operational costs are paid into the pockets of employees, contractors, suppliers and manufacturers in Australia," it said.
The profit was still an improvement on a $60 million loss reported for 2015.
Exxon, a 50 per cent owner of the Bass Strait joint venture with BHP Billiton, said 2016 saw the highest gas production ever from the joint venture's Longford plant in Victoria, supplying 19 per cent of east coast demand. It also supplied about half of Victoria's vehicle and aviation fuel needs.
Shares in Quintis, the sandlewood producer targeted by American hedge fund Glaucus in March this year, took a hammering this week after the Financial Review revealed a major buyer of its sandlewood appeared to have cancelled its contract. Quintis then admitted on Wednesday that a supply deal with Galderma was terminated in December last year, but said its board and top management hadn't been told.
Shares fell 43.9 per cent on Wednesday and a further 23.3 per cent yesterday, but this morning, the Perth-based company is enjoying some support, rising 4.4 per cent at the open. Shares in Quintis has fallen slightly since, parring gains to just 2.2 per cent.
The buying activity may have something to do with a notice filed to the ASX first thing this morning showing Quintis has a new institutional shareholder on the books. Blackrock, the New York-based global asset manager, has taken a 5.14 per cent stake in the company. It's various global subsidiaries have been quietly buying up the stock since January, and made their last purchases on market on Wednesday, as the price plunged.
After the massive falls, Bloomberg last night called Glaucus' short of Quintis "a win".
"It took the Glaucus report to really shine a light on it," Ben McGarry, portfolio manager at Sydney-based Totus Capital Pty, told Bloomberg. Totus is also shorting the stock. "It's good for the market to have firms like this doing fundamental research and highlighting serious issues," Mr McGarry said.
Quintis says Glaucus' report is misleading. But for better or worse, it's had a massive impact on the company's share price, which is down 65 per cent since the March 22 attack.
Glaucus' Soren Aandahl, meanwhile, continues to search for further targets in Australia.
Australia's sharemarket opened almost flat on Friday, slipping just 0.2 per cent.
The big miners, utilities stocks (particularly energy players) and Cochlear provided a healthy boost to the index, but were outweighed by large falls in almost all other sectors.
Alumina is up 3.7 per cent, while Saracen Mineral rose 2.7 per cent after being raised to an 'outperform' by Macquarie.
Gold miners like Newcrest Mining, St Barbara and Northern Star Resources gained at the open, up 2.9, 2.5 per cent and 2.2 per cent respectively.
The financials provided a heavy drag, responsible for almost half the index's losses at the open.
BT Investment Management, yesterday's biggest loser, continued to fall, shedding 2.6 per cent after yesterday's 5.9 per cent drop. CBA and Westpac were both lower, shedding 0.2 per cent and 0.1 per cent respectively at the open. But enjoying some buying were NAB and ANZ - both up 0.1 per cent. Macquarie was down a hefty 0.8 per cent.
Sirtex Medical was the morning's biggest loser, falling 4.2 per cent, though it's not clear what's prompted the sell-off. It was downgraded by Bell Potter's John Hester to a hold from a buy earlier this week, though had posted only modest falls immediately after this.
Myer continued to be sold off after yesterday's weaker-than-expected third-quarter sales figures - it was off 2.0 per cent.
CMC Markets chief market analyst Michael McCarthy thinks the ASX will probably shake off the weak start over the day, as rallies on oil and gold overnight should provide some support.
"Local investors are facing another low data day. A report on Australian credit card purchases is unlikely to influence trading, nor are Japanese money supply numbers. Two days of gains in oil prices could support risk appetites. A realistic scenario is a start in the red for most indices, followed by a quiet bubble higher over the session."
Credit ratings agency Moody's has cut the long-term debt ratings of a series of major banks due to concerns about rapidly soaring house prices and high levels of consumer debt.
Sound familiar? No, the big four are safe, but six of Canada's largest lenders were downgraded overnight, over a series of issues that would be familiar to Australian readers.
In its statement, Moody's pointed to ballooning private- sector debt that amounted to 185 percent of Canada's gross domestic product at the end of last year. House prices have climbed despite efforts by policy makers to cool the market, it said Wednesday. Prices in Toronto and Vancouver have soared on the backs of strong economies, limited supply and foreign demand that's sparking some speculative buying in the two markets.Toronto prices jumped 25 percent in April from the year earlier.
"Expanding levels of private-sector debt could weaken asset quality in the future," David Beattie, a Moody's senior vice president, said in the statement. "Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past."
The ratings firm lowered the long-term debt and deposit ratings one level on Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada Wednesday. The move left TD with a long-term debt rating of Aa2, the third- highest level. Moody's lowered the other five to A1, the fifth-highest. The outlook is negative on all six lenders.
"It's never a good thing when there's a wide-scale downgrade within a country," said Andrew Torres, founding partner and chief investment officer at Toronto-based Lawrence Park Asset Management. "Even though you can't ignore the move Moody's made overnight, I don't think it's the sign of an impending banking crisis in Canada."
The downgrades follow a recent run on deposits at alternative mortgage lender Home Capital Group Inc. that sparked concern over a broader slowdown in the nation's real estate market as Canadians are taking on higher levels of household debt. The firm's struggles have taken a toll on Canada's biggest financial institutions, which have seen stocks slide on concern about contagion.
The Canadian dollar weakened 0.3 percent to 1.3694 per U.S. dollar at 4:39 p.m. in Toronto, paring a decline of as much as 0.8 percent earlier in the day. The currency is down 1.9 percent this year, the worst performer among Group-of-10 peers.
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A lack of conviction looks a feature of the markets at the moment, writes IG strategist Chris Weston:
With somewhat of a negative feel to the Asian start it promises to be a fairly unpredictable and messy open. Japan is eyeing a soggy start, while the ASX 200 should unwind around 5872, down six points, very much in-line with the falls seen in SPI futures.
It's interesting that we saw a bullish outside day reversal in both the ASX 200 and SPI futures on Wednesday (with price trading below Tuesdays low and closing above the high). In theory, this showed that the bulls fought back control from the bears, however, importantly, we didn't see any conviction in the follow through buying yesterday and traders were quick to sell into the early rally, notably in the banks.
Financials therefore need close attention, as the sector has been the weakest link this week, with the sector down 1.7% in this period.
One suspects that given the flat opening call that some stability will be seen on open, as will be the case in BHP, with its American depository receipt (ADR) closing up 0.8%. This modest expected gain in BHP is once again a reflection of the crude market, which saw small gains and built on yesterday's strong rally.
It has now been disclosed that OPEC will roll over the November output cut agreement for a further six months and perhaps we would have seen US crude trading even higher into the $US48 a barrel region if they hadn't increased their estimate for non-OPEC output by 64% to 950,000 barrels a day.
Bulk commodities are slightly lower. Keep an eye on China's monthly credit data (no set time), with M2 money supply expected to increase to a 10.8% growth rate (+20bp), new loans expected at RMB815 billion and aggregate financing at RMB1150 billion. Anything lower than these estimates will continue to fuel the concerns in China of regulation, deleveraging, lower liquidity and a reduced credit environment that is causing Chinese traders to move capital out of commodities and equities.
Oil climbed for a second day, leaving the worst of last week's rout behind for now, as U.S. stockpiles fell and two OPEC members said there's a consensus to extend output cuts.
Futures rose 1.1 percent in New York after surging 3.2 percent on Wednesday, when government data showed a 5.25-million barrel stockpile drop last week. Two members of the Organization of Petroleum Exporting Countries said Thursday there is consensus on extending production curbs for six more months when the group meets May 25. Price gains eased after OPEC boosted forecasts for supplies from rivals this year by 64 percent.
"We've probably put a floor in the market," Mark Watkins, the Park City, Utah-based regional investment manager for the private client group at U.S. Bank.. "Inventories did fall last week and investors are pricing in expectations of OPEC extending the cuts. Those looking for a bullish narrative have found it."
West Texas Intermediate for June delivery climbed 50 cents to settle at $47.83 a barrel on the New York Mercantile Exchange. Total volume was about 7 percent above the 100-day average. Futures rose $1.45 to $47.33 on Wednesday, the biggest gain since Dec. 1. Brent for July settlement increased 55 cents, or 1.1 percent, to $50.77 on the London-based ICE Futures Europe exchange, after rising 3.1 percent on Wednesday. The global benchmark oil closed at a $2.57 premium to July WTI.
Oil is advancing after tumbling last week to to its lowest level since OPEC agreed to trim output in November. All OPEC members support an extension of the cuts for a second six-month period, as do non-members that joined last year's accord to curtail excess global supply.
"The signals from OPEC as well as some non-OPEC members are pretty clear, that they will continue with their production cut," Rainer Seele, chief executive officer of Vienna-based OMV AG said. "It will stabilize the oil price, we will see the oil price in the low 50s."
US stocks have fallen after worse-than-expected sales drops at Macy's and Kohl's sparked a selloff in shares of department stores and stirred fears that consumers are not spending enough to drive strong economic growth.
Macy's dismal quarterly performance sent its shares tumbling 17 per cent, taking a toll on the consumer discretionary sector, which fell 0.6 per cent.
Kohl's dropped 7.9 per cent after it reported a drop in quarterly sales, while shares of Nordstrom and JC Penney each dropped more than 7 per cent.
The weak corporate reports left investors looking to April retail sales data due out on Friday for signs of whether consumers are simply shifting their spending habits away from department stores, or just aren't spending.
Investors were concerned about developments relating to the firing of FBI Director James Comey by US President Donald Trump.
"The market has continued to get a little bit ahead of itself and it's just looking for any sort of a reason to have a pullback," said Catherine Avery, president of Catherine Avery Investment Management.
"Part of it is worry (that) the distraction that we've had with Comey is going to take (lawmakers') eyes off the tax reform and health care reform."
The Dow Jones fell 0.1 per cent, while the S&P 500 and Nasdaq each lost 0.2 per cent.
Meanwhile, European shares pulled back with Spanish blue chips suffering their biggest one-day loss in six months, weighed down by losses among banks, while Italian lender UniCredit shone after solid results.
Traders said equities in the region looked set for a short-term correction after hitting fresh highs this month following the market-friendly outcome of the French presidential vote.
Earnings and the economic outlook, however, remained strong, pointing to solid prospects for stocks in Europe.
Good morning and welcome to the Markets Live blog for Friday.
Your editors today are Myriam Robin and Patrick Commins.
This blog is not intended as investment advice.
Fairfax Media with wires.
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