Thursday, December 29, 2016

Thursday, December 29, Morning Global Market Roundup: Dollar Dips, Nikkei Slugged By Toshiba Selloff

By Wayne Cole
December 29, 2016

Asian shares were subdued on Thursday after Wall Street suffered a mild setback after weeks of gains, while a pullback in U.S. yields prompted year-end profit taking in the dollar.

Japan's Nikkei shed 1.3 percent as the yen firmed and Toshiba Corp dived 16 percent after news of potential massive writedowns led to a downgrade of its credit ratings.

S&P said it expected shareholder equity to "drastically shrink", eroding the conglomerate's financial resilience.

Moves elsewhere were more modest. Australia's main index recouped early losses to finish flat at a 17-month peak, while stocks in Shanghai added 0.2 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan was last up 0.19 percent.

The pullback on Wall Street came amid light volumes and likely reflected caution about what the New Year might bring, given Wednesday was the first session when trades actually settle in January.

The Dow fell 0.56 percent, while the S&P 500 lost 0.84 percent and the Nasdaq 0.89 percent. Boeing fell 0.9 percent after Delta Air Lines canceled a $4-billion order for 18 Dreamliner aircraft.

Technology was the largest weight on major indexes, with Nvidia down 6.9 percent after short seller Citron Research said the market was overlooking the headwinds for the stock - which had earlier touched a record high.

Weak home sales data were blamed for some of the selling, though normally this series barely gets a mention in markets.

Contracts to buy previously-owned U.S. homes fell in November to their lowest level in nearly a year, a hint of how rising mortgage rates could weigh on the housing market.

U.S. bonds made a rare rally as the soft report combined with surprisingly strong demand for a sale of new five-year Treasury notes. Yields on 10-year paper fell to their lowest levels in two weeks to around 2.492 percent.

Yet euro zone yields were also falling on concerns about the strength of a rescue plan for Italian banks and normal year-end caution.

Germany's 10-year yields hit their lowest in seven weeks at 0.181 percent, while their discount to Treasury yields reached the widest on record.

The ever-widening yield gap kept the euro restrained around $1.0450, after touching an eight-session trough of $1.0372 overnight. Sterling was also soft at $1.2243 after hitting its lowest in two months.

The dollar eased 0.5 percent on the yen to 116.75, but was still up 12 percent over the past two months.

In commodity markets, oil came off the boil after data showed a surprise build in U.S. crude inventories. U.S. crude fell 26 cents to $53.80 a barrel, while Brent was last quoted down 4 cents at $56.18. [O/R]

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