Asia markets enjoy pre-Christmas cheer, euro avoids sell-off

AFP: Most Asian markets on Friday saw in the Christmas break on a positive note, picking up the baton from Wall Street while the euro stood firm against a sell-off despite a victory for Catalan separatists in a snap poll.

Global equities rallied over the past year on hopes Donald Trump’s key election promise to cut taxes would boost corporate profits and put money in people’s pockets, but traders cashed in their profits soon after the bill was passed this week.

However, buying perked up again Thursday on bets that the tax reform will further fire the already healthy US economy, while there was also cheer for news that lawmakers had agreed a deal to avert a painful government shutdown.

“A day after being nonplussed with the passage of the US tax bill through the House and Senate, it seems stock traders decided that yes, after all, they do think the tax cuts will help valuations and the economy,” said Greg McKenna, chief market strategist at AxiTrader.

The US gains extended into Asia with Hong Kong up 0.3%, Sydney adding 0.2% and Singapore putting on 0.3%. 

Tokyo’s Nikkei closed 0.2% higher, while Seoul, Wellington, Taipei and Jakarta were also stronger.

But Shanghai dipped 0.1%.

“The US corporate tax cut will lead to better earnings results and have a positive impact on the economy,” Hideyuki Ishiguro, a senior strategist at Daiwa Securities in Tokyo, told Bloomberg News.

Reality check

However, Stephen Innes, head of Asia-Pacific trading at OANDA, warned of possible headwinds for 2018, pointing out that Trump could struggle to push through a planned $1 trillion infrastructure bill in the face of low poll ratings and possible mid-term election losses. 

On currency markets the euro edged down but held its own after Catalan separatists won the crucial election Thursday, fuelling fresh uncertainty in Spain, one of the eurozone’s biggest economies.

The vote came after a failed independence bid earlier this year rattled Europe and triggered Spain’s worst political crisis in decades. 

While pointing out there had been little immediate negative impact on the single currency, Innes said the result “would deal a significant blow (to) Spanish Prime Minister Mariano Rajoy that could potentially escalate”.

Bitcoin sank 20% to briefly sit just above $13,000 for the first time since December 7, hit by profit-taking.

The volatile cryptocurrency kicked the week off with a bang, hitting $19,500 as it extended its astonishing rise but it has suffered a significant correction this week, losing a third of its value since its Monday high.

Investors are having a “reality check”, Innes said. “At the heart of the matter was a frenzied demand for coins with limited supply has now led to unsophisticated investors holding the bag at the top.”

At its height, Bitcoin had soared almost 30-fold since the start of the year and has moved into the mainstream as two major US exchanges began trading futures in the unit.

Gold prices hover below 2-week high, set for second weekly gain

Reuters: Gold prices held steady below a two-week high in thin pre-holiday trade on Friday amid firmer equities and a sturdy dollar, remaining on track to log a second consecutive week of gains.

Spot gold was steady at $1,267.08 an ounce at 0703 GMT, after hitting its highest since Dec. 6 at $1,268.91 in the previous session. It was up 0.95 percent for the week. 

US gold futures were unchanged at $1,270.40 an ounce. 

“(We are seeing) normal market activity ahead of the holiday weekend. Expect some profit-taking to be seen from bargain-hunters who bought at the start of the week at the $1,254 level,” said Mun Chun Loh, director of private wealth at Gold Silver Central Pte Ltd in Singapore.

The dollar edged up on Friday though it remained on track for weekly losses, while the euro slumped after Catalan vote results indicated a victory for separatists in a blow to Madrid.

“The market’s a bit flat due to the holidays and there seems to be some kind of uncertainty around,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

The US Congress on Thursday averted a government shutdown just one day before federal funding was due to expire, sending Trump a bill to provide just enough money to keep agencies operating through Jan. 19.

The greenback was also supported as Congress had approved the biggest overhaul of the country’s tax code in 30 years, which was expected to give at least a short-term lift to economic growth.

Asian stocks edged up on Friday as upbeat data pointed to steady growth in the US economy.

“Under the tax reform, people are waiting to see if it’s good for the US economy in the coming months ... people don’t want to do anything about it for the time being,” Leung said.

“Next week as well, unless there’s an exciting event, I think we’ll be quiet,” he said, adding support for the yellow metal comes in around $1,260 an ounce and resistance near $1,270.

The Moscow Exchange will launch deliverable futures for gold in 2018 in a move to further prop up bullion market liquidity, bourse chief executive Alexander Afanasiev said on Thursday.