By Nichola Saminather
SINGAPORE Caution was the name of the game in financial markets on Friday ahead of U.S. President-elect Donald Trump's inauguration later in the day, with Asian stocks and the dollar pulling back and U.S. Treasury yields hovering near their highest close this year.Investors were also awaiting fourth-quarter and full-year GDP data from China at 0200 GMT, 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 .MIAPJ0000PUS slipped 0.1 percent, and looked set to end the week flat.Japan's Nikkei .N225 rose 0.1 percent, on track for a near 1 percent weekly loss. Australian stocks retreated 0.6 percent, heading for a 1.1 percent decline for the week. South Korean shares .KS11 slid 0.3 percent, poised to end the week 0.5 percent lower.Economists polled by Reuters expect China to report its economy grew by a steady 6.7 percent 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," 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 0100 GMT, for new clues on the likely pace and timing of Fed rate hikes this year.The 10-year U.S. Treasury yield US10YT=RR was unchanged at 2.472, after spiking to as high as 2.496 on Thursday, amid wariness about whether 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. U.S. 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 percent to 115.02 yen JPY=D4. On Thursday, it surged as much as 0.8 percent before closing less than 0.2 percent higher at 114.82 yen. The dollar index .DXY, 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 percent gain to close up 0.2 percent. U.S. stocks were also restrained, with the major indexes posting losses of as much as 0.4 percent, and the Dow Jones Industrial Average .DJI 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 $1.06595 EUR=EBS. It dropped as much as 0.4 percent on Thursday, before retracing its steps to close 0.3 percent 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 U.S. inventories. U.S. crude CLc1 added 0.2 percent to $51.52 per barrel, pulling further away from Wednesday's one-week low. Spot gold XAU= was steady at $1,204.32 an ounce, retaining its slight gains from Thursday. (Reporting by Nichola Saminather; Additional reporting by Sinead Carew; Editing by Kim Coghill)
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Updated Date: Jan 20, 2017 07:00 AM