Singapore - Caution prevailed in financial
markets on Friday ahead of US President-elect Donald Trump's
inauguration, even as China's economic growth beat expectations
and Federal Reserve Chair Janet Yellen toned down her earlier
hawkish policy stance.
European markets were headed for a subdued start amid
trepidation over Trump's first speech as president. Financial
spreadbetter CMC Markets expected Britain's FTSE 100 to
open 0.1 percent higher, and Germany's DAX and France's
CAC 40 to start the day little changed.
MSCI's broadest index of Asia-Pacific shares outside Japan
retreated 0.2 percent, and looked set to end the
week flat.
Japan's Nikkei reversed earlier losses to close 0.3
percent higher, posting a 1.1 percent weekly loss.
China's fourth-quarter gross domestic product growth came in
at 6.8 percent, versus forecasts of 6.7 percent, supported by
higher government spending and record bank lending.
The economy expanded 6.7 percent in 2016, in line with
forecasts.
The data helped lift China's CSI 300 index 0.8
percent, setting it on course for a 1 percent weekly gain.
Despite the headline growth, concerns are growing about
whether Beijing can contain the financial risks from an
explosive expansion in debt fuelled by years of government
stimulus spending.
A cooling housing market and painful structural reforms, as
well as pressure on exports if Trump fulfils his protectionist
promises, are also risks for China in 2017.
"On the domestic front, China needs to find a balance
between chasing growth and deflating asset bubbles," said Zhou
Hao, emerging markets economist at Commerzbank in Singapore.
"It makes sense for China to tolerate a growth moderation in
the coming year, while leaving more flexibility to structural
reforms," he said, adding he expects China to lower its growth
target to around 6.5 percent.
The dollar inched down after Federal Reserve Chair Janet
Yellen said that gradual monetary adjustments were prudent,
although she warned against letting the economy run hot.
Her statement was seen as slightly less aggressive than a
Wednesday speech in which she cautioned that waiting too long to
raise rates could lead to "too much inflation, financial
instability, or both," amid comments by other Fed officials that
also favoured faster hikes.
The dollar index, which tracks it against a basket of
six major global peers, pulled back 0.2 percent to 100.97 on
Friday. On Thursday, it initially surged on upbeat US data
pointing to brightening economic prospects, before closing 0.2
percent higher as concern about Trump's policies returned.
The greenback slipped 0.2 percent to 114.64 yen.
US homebuilding rebounded sharply in December amid
stronger demand for rental housing, and the number of Americans
filing for unemployment benefits fell to near the 43-year low
touched in mid-November.
"The dollar could fall if Trump pushes forward his
protectionist rhetoric in his inauguration speech," said Minori
Uchida, chief FX analyst at Bank of Tokyo Mitsubishi UFJ. "Some
investors also expect more details on his policies, so the
dollar could also slip if Trump does not mention any specifics."
The 10-year US Treasury yield fell 0.4 percent
to 2.4613, after spiking to a 2 1/2 week high of 2.496 on
Thursday.
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US stocks were also restrained overnight, with the major
indexes posting losses of as much as 0.4 percent, and the Dow
Jones Industrial Average down for its fourth straight
session.
The euro rose on Friday, extending gains following initial
losses after European Central Bank chief Mario Draghi played
down a recent rise in euro zone inflation, as investors parsed
his statement and noted no changes to policy.
The common currency advanced 0.2 percent on Friday to $1.068
.
In commodities, oil rose on expectations of tighter supply
and reports of record Chinese demand, but the gains were
tempered by concerns about swelling US inventories.
US crude added 0.3 percent to $51.53 per barrel,
pulling further away from Wednesday's one-week low. But it
remains down 1.6 percent for the week.
Global benchmark Brent advanced 0.3 percent to
$54.32, shrinking its weekly loss to 2 percent.
Amid nervousness about Trump's presidency, investors took
shelter in gold. Spot gold extended gains 0.2 percent to
$1,207.06 an ounce, set for a weekly increase of 0.7 percent,
its fourth straight week of gains.