Federal Reserve Bank of Richmond President Jeffrey Lacker said on Friday that interest rates will likely need to be raised more than three times next year. Lacker, who did not have a vote but participated in the Fed's policy meetings this year, said the Fed would still be able to raise rates gradually, but perhaps not as slowly as is expected by the majority of policymakers. The Fed raised rates only once in 2016, which followed a single rate hike last year.
Investors are taking a wait-and-see attitude ahead of a speech from Federal Reserve Chair Janet Yellen for further insight into last week's decision by the Fed to raise U.S. overnight interest rates for the first time this year and its projection of three rate hikes in 2017.
The US dollar index, which tracks the dollar against a basket of six major counterparts, retreated 0.28% at 102.66. Last week it climbed to 103.56, its highest level since 2002, when the US Federal Reserve raised the interest rate by a quarter-point and indicated a more hawkish stance towards future rate hikes than expected.
U.S. Treasury yields fell further from multi-year highs after the report, furthering the day's price moves as investors covered short positions ahead of year-end as they looked to Yellen's speech. The yield on 10-year U.S. Treasuries was last 2.53%, down nearly 7 basis points.
Oil prices edged lower but held around $55 per barrel, supported by delays in new Libyan oil exports and expectations of tighter supplies going into 2017. Brent futures fell 0.7% to $54.82 a barrel, while U.S. West Texas Intermediate crude dipped 0.2% to $51.79 per barrel.
Among Asian bourses
Nikkei falls on profit taking
The Japan share market closed marginally lower, snapping a nine-day winning streak, as investors elected to book profit on caution ahead of the Bank of Japan's monetary policy assessment on Tuesday and a scheduled speech from U.S. Federal Reserve Chairwoman Janet Yellen later Monday. The benchmark Nikkei 225 index fell 0.05%, or 9.55 points. The broader Topix index of all first-section shares declined 0.1%, or 1.61 points, to finish at 1,549.06.
Shares of export related companies declined, hit by profit taking and a stronger yen on concerns about China-US tensions after Beijing seized a US Navy drone in international waters in the South China Sea. The tensions pushed traders into the Japanese unit, which is seen as a safe-haven investment in times of turmoil. A stronger yen hurts the profitability of Japan's major exporters, hitting demand for their shares. Toyota declined 0.15% to 7,144 yen. Panasonic slipped 0.81% to 1,281 yen, with Canon down 0.32% at 3,417 yen.
Nintendo shares dropped 7.1% to 24,540 yen, extending a more than four% fall Friday as its latest iPhone game, Super Mario Run, met with lukewarm reviews. Nintendo's mobile game partner, DeNA, was lower 7.66% at 2,638 yen.
Domestic demand-oriented issues, including companies involved in drinking related foods, inclined. Snack maker Kameda Seika climbed 0.77% to 5,200 yen a share, and supermarket operator Yaoko was up 1.42% at 4,630 yen.
Australia Stocks gain on credit ratings relief
Australian share market finished first session of penultimate week of calendar year 2016 firmly in green, buoyed by easing concerns of its coveted AAA credit rating downgrade after sticking to its ambition of returning the budget to surplus in 2020-21 despite softer growth forecasts. In a mid-year fiscal update, the government revised down the nation's cash deficit of A$37.1 billion in 2016-17 -- as announced in the May budget -- to A$36.5 million. But it forecast widening deficits in the next three years before a return to surplus. Standard and Poor's said on Monday that no immediate effect on its top AAA rating stance but warned the government's worsening forecast fiscal position further pressures the rating. Moody's and Fitch also kept their ratings on hold, for now. At the closing bell, the benchmark S&P/ASX 200 index inclined 29.20 points, or 0.53%, to 5562.10, while the broader All Ordinaries index added 23.10 points, or 0.41%, to close at 5612.80.
Graphite miner Syrah Resources shot up 6.4% to be day's best performer. The day's worst performer was Seven West Media, closed down 8%, after news of a workplace affair and drug scandal involving CEO Tim Worner and a former executive assistant caused investors to flee.
Financial stocks helped underpin the market's gain, with the four biggest banks collectively adding more than 5 points to the ASX 200. Commonwealth Bank of Australia rose 0.5%, while Westpac, Australia & New Zealand Banking and National Australia Bank each gained 0.4%.
Oil companies also had a good day as both Brent and WTI crude extended rallies from last week. Beach Energy led the pack, up 2.5%, while Woodside Petroleum was 0.6% higher, Oil Search added 0.3% and Santos picked up 0.5%.
Fortescue Metals shares were down 4.8% in line with a slump in iron ore futures and after the miner said it was looking less likely that a joint venture deal can be agreed with larger rival Vale. Iron ore futures and were down 3.7% at 581.50 yuan in late Monday trade, after falling by as much as 5%, extending losses to a fourth session in a row.
China Stocks end lower
Mainland China stock market closed down, as concern over relations between the world's two largest economies resurfaced after China seized an American underwater drone in the South China Sea over the weekend, prompting U.S. President-elect Donald Trump to accuse China of stealing it from international waters and label the incident an unprecedented act. Meanwhile sentiments were also hit by dimming hopes for fresh monetary stimulus after Beijing vowed to contain asset bubbles next year by keeping monetary policy prudent and neutral. Markets were cautious after China's top leaders vowed over the weekend to stem asset bubbles in 2017 and place greater importance on the prevention of financial risk. Meanwhile, China's bond market weakness persisted on Monday, deepening concerns over liquidity stress toward the year-end. The price of China's 10-year treasury futures for March delivery was down more than 1%. Most sectors lost ground, led by properties, after the sector was identified by China's top leaders as a focus of risk control in 2017.
The Shanghai Composite Index fell 0.16% to 3,118.08, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 0.38% to 1,984.10. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, declined 0.89% to close at 1,980.41 points.
Chinese metals futures tumbled Monday during late trade, as growing inventory and Beijing's calls to curb asset bubbles prompted panic selling. The benchmark futures contract, traded on the Dalian Commodity Exchange, slumped 7.2%, with sales order piling in during the last 15 minutes. Steel rebar futures fell 5.7%.
The growth of housing prices in China decelerated sharply in November, reined in by property-buying controls in major cities and regulators' greater scrutiny of loans made to developers. The average price of new homes in 70 cities rose 0.6% in November from October, according to data released Monday by the National Bureau of Statistics. That compares with a 1.1% gain in October. China Vanke, whose share price had been boosted by a heated bidding war, slumped 6.1% to a four-month low on Monday, amid a regulatory clampdown on barbaric acquisitions by insurers. Vanke was down 22% since the end of November.
Hong Kong Stocks extend losses for third day
The Hong Kong stock market finished down, extending a sell-off to three successive days, as investors tracked a negative lead from Wall Street, concern about U.S.-China relations and higher borrowing costs in the world's largest economy dampened investor sentiment. Hong Kong's benchmark Hang Seng Index declined 0.9% or 188.07 points to close at 21,832.68, the worst level it has seen since August 4. The Hang Seng China Enterprises Index, known as the H-shares index, ended 1% or 92.9 points lower at 9,377.43. Turnover reduced to HK$55.8 billion from HK$71.7 billion on Friday.
Investor worries over relations between the world's two largest economies resurfaced after China seized an American underwater drone in the South China Sea over the weekend, prompting U.S. President-elect Donald Trump to accuse China of stealing it from international waters and label the incident an unprecedented act.
Insurers and property shares were weak. Ping An Insurance fell 1.7% to HK$39.75 in Hong Kong. Its Shanghai-listed shares shed 0.2% to 35.4 yuan.
Hong Kong developers also declined, with Cheung Kong Property down 1.3% to HK$49.7. China Vanke fell 3.2% to close at HK$18.72. The mainland Chinese property developer scrapped a white knight rescue plan involving Shenzhen Metro, which was intended to help it fend off a hostile takeover.
Banks retreated, as HSBC Holdings lost 0.3% to HK$63.75, and Bank of China Hong Kong finished 1.3% lower at HK$27.35.
Sensex, Nifty hit nearly two-week closing low
Key benchmark indices settled with modest losses in a lacklustre trading session. The barometer index, the S&P BSE Sensex, lost 114.86 points or 0.43% to settle at 26,374.70. The Nifty 50 index fell 35.10 points or 0.43% to settle at 8,104.35. After a bit of initial volatility, the two key benchmark indices hovered in negative zone throughout the trading session. Weakness in Asian markets, decline in major US stock indices over the weekend coupled with lacklustre trading on the European bourses added to the market gloom.
Cipla rose after the company said it has received final approval for its abbreviated new drug application (ANDA) for Fenofibrate tablets USP 48mg and 145mg, from the United States Food and Drug Administration (USFDA). Lupin advanced after the company announced that it has launched its Voriconazole Tablets, 50 mg & 200 mg and Voriconazole Oral Suspension, 40 mg/ml in the US.
Axis Bank lost 1.11% after the bank announced that it has reviewed and decided to reduce the marginal cost of funds based lending rates (MCLR) of the bank by 10 basis points in the overnight tenor and by 15 basis points across all other tenors. The rates were effective from 17 December 2016.
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