Asia stocks to end 2016 on buoyant note, euro calms after early spike

EghtesadOnline: Asian stocks looked set to end 2016 on an upbeat note, while profit-taking weighed on the dollar and the euro held near a two-week high after spiking early in the day.

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30 December 2016

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5 percent on Friday, diverging from Wall Street, which posted slight declines overnight.

According to Reuters, Europe's STOXX 600 index also closed lower as appetite for risk remained subdued ahead of the new year. British stocks posted gains of 0.2 percent.

In a year marked by major political surprises, including Brexit in June and the unexpected election of political novice Donald Trump as U.S. President in November, Asia Pacific ex-Japan stocks are poised to record a 3.8 percent gain.

Despite the modest figure -- the Dow Jones Industrial Average, in contrast, is up a whopping 14 percent -- that is the Asia-Pacific index's best performance in four years and follows two years of losses.

Thailand, with an almost 20 percent gain, is set to be the region's best-performing major market, followed by Indonesia, which has surged almost 16 percent. China looks to be the laggard with a loss of about 12 percent. Malaysia, down 3.4 percent, and the Philippines, down 1.6 percent, were the only other markets poised to post losses for the year.

Japan's Nikkei .N225 retreated 0.4 percent on Friday, erasing most the year's meager gains and set to end the year flat. That is its worst performance in five years, with the index slammed by the safe-haven yen's 22 percent surge from the start of 2016 to its peak after the Brexit vote.

The Japanese currency has fallen almost 15 percent since that peak -- with most of the losses since November driven by a surge in the dollar, reflecting exuberance over Trump's anticipated stimulatory policies -- but is still set for a 3.5 percent gain versus the dollar this year.

"2016 has been a year of changes and these changes had hardly been slight," Jingyi Pan, market strategist at IG in Singapore, wrote in a note. "A preference for safe haven assets to tide through the year end have set in, with gold and yen taking off."

The greenback, which has soared 10.5 percent against the yen since before the election results were announced, was last down 0.2 percent at 116.44 yen JPY=D4, extending a 0.5 percent slump seen overnight.

The dollar index .DXY, which tracks the greenback against a basket of six major global peers, dropped 0.35 percent to 102.28 on Friday, following a 0.6 percent slide on Thursday. It is poised to end 2016 3.7 percent higher.

The euro EUR=EBS jumped as much as 2 percent early on Friday, its biggest intraday gain since Nov. 8, before settling back down to trade 0.6 percent higher at $1.0527.

"It's a really thin market today, and suddenly, offers disappeared and short-term players pushed the euro higher and took out stops. That's all," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

The common currency is still down 3 percent for the year.

The Chinese yuan CNY= is on track to end the year weaker. The dollar has strengthened 7.1 percent versus the Chinese currency, even though China has been selling the dollar to defend the yuan, sending its stock of U.S. government debt to the lowest in more than six years in October.

U.S. bond yields, which had been climbing since the U.S. election on expectations of higher interest rates, have reversed course over the past two weeks as investors have sought shelter from risk. They were at 2.4659 percent on Friday, slightly above a two-week low touched overnight.

Gold held near a two-week high, basking in its safe haven status amid the broad pull-back in risk.

Spot gold XAU= edged up 0.1 percent to $1,159.31 an ounce, adding to its 1.5 percent surge on Thursday. It is headed for a 9.3 percent jump this year, snapping a three-year losing streak.

Oil prices inched up after sliding on Thursday in their first day of losses this week, after a rise in U.S. inventories caught markets off guard.

U.S. crude CLc1 added 0.2 percent to $53.84 a barrel on Friday, after falling 0.5 percent on Thursday. It is on track for a 46 percent surge this year, recovering all of its 2015 losses.

Brent crude LCOc1 jumped 1.2 percent to $56.83, despite a paltry 0.1 percent loss on Thursday. It is headed for an eye-watering 51 percent gain this year, almost back to where it was at the start of 2015.