Asian shares flat but on track for weekly gains

TOKYO - Asian shares flatlined on Friday but were on track for robust weekly gains, while the euro caught its breath after sliding when the European Central Bank trimmed the size of its asset purchase program and also extended it for longer than many had expected.

MSCI's broadest index of Asia-Pacific shares outside Japan wobbled close to the previous session's close in early trading, poised for a weekly gain of 2.2 percent.

Japan's Nikkei stock index was up 0.6 percent, up 2.4 percent for the week in which the dollar gained 0.6 percent against the yen.

The dollar was up 0.1 percent at 114.18 yen.

The euro was licking its wounds at $1.0615. It had been as high $1.0875 before collapsing when markets realized the ECB's actions were actually very dovish.

The ECB said it would reduce its monthly asset buys to 60 billion euros ($63.68 billion) as of April, from the current 80 billion euros, and extend purchases to December from March - three months longer than what some analysts had forecast.

That dragged down two-year yields across Europe and sharply steepened the yield curve, a gift for banks that typically borrow short maturities and lend long.

The promise of lower rates for longer was taken as a green light for carry trades, where investors borrow euros at cheap rates to invest in higher yielding currencies.

"This effective and extended easing may make euro a funding currency of choice and so puts euro-crosses in focus," Westpac analyst Tim Riddell said in a note.

ECB President Mario Draghi said the unexpected move was not an outright winding-down of the central bank's quantitative easing (QE) program, and the central bank reserved the right to increase the size of purchases again if the eurozone economy falters.

The ECB's bond purchase changes came less than a week before the Federal Reserve's policy meeting next Tuesday and Wednesday.

Interest rates futures, implied traders saw a 98 percent chance the US central bank would raise interest rates by a quarter point next week, and about a 50 percent chance it would raise rates by at least another quarter point by June 2017, according to CME Group's FedWatch program.

Despite the impending rate hike, major US stock indexes climbed again on Thursday and set fresh record highs as Wall Street continued its month-long rally following the election of Donald Trump to president.

"We're at a point in time between big announcements from a couple of the big central banks after the ECB, and looking forward to fed next week, so the current momentum underway seems to be the path of least resistance at this point in time," said Bill Northey, chief investment officer of the private client group at US Bank in Helena, Montana.

"We've come a long way, and I wouldn't expect us to keep same pace, but the trajectory might be correct" for dollar strength, he said.

The dollar index, which tracks the greenback against a basket of six major rival currencies, was steady on the day at 101.12, up 0.3 percent for the week.

Oil rebounded on growing optimism that non-OPEC producers might agree to cut output following a cartel agreement to limit production.

US crude added 0.3 percent to $51.01 a barrel.

source: news.abs-cbn.com

Big year ends with Wall Street hopeful for 2014

NEW YORK - As Wall Street's best year in more than 15 draws to a close, few are expecting a repeat performance in 2014, though traders have plenty of reasons to feel optimistic.

While the market will likely enter January quietly, with many traders still out for the holidays and few major catalysts, the upward trend is seen continuing next week, especially in some of 2013's high-flying names.

Economic growth is expected to accelerate next year, boosting employment and consumer purchasing power. But with markets repeatedly notching all-time highs, that may not translate to market gains as dramatically as in 2013.

"There's a pervasive feeling that the economy is getting better, and the Fed is still on the market's side after saying it would keep rates low," said Donald Selkin, chief market strategist at National Securities in New York.

"However, while new money will still be flowing into stocks next year, probably we'll see less money come in. There's little chance of another 30 percent gain or so next year."

The S&P 500 has risen 29 percent so far in 2013, its best annual performance since 1997. The Dow Jones industrial average is up 26 percent while the Nasdaq is nearly 38 percent higher.

The gains have been widespread, with all 10 S&P 500 sectors higher on the year. The weakest group, telecoms, rose 6.5 percent while consumer discretionary led the year with a gain of 40 percent.

One of the market's biggest boosts this year - the Federal Reserve's stimulus program - will not be as strong a factor after the central bank announced a slowing of the program in December. The Fed beginning in January will buy $75 billion in Treasuries and mortgage-backed bonds per month, down from $85 billion, and Fed Chairman Ben Bernanke, whose term expires on Jan. 31, 2014, suggested the U.S. central bank could continue to slowly reduce that stimulus throughout 2014.

The latest Reuters poll showed analysts expect the S&P 500 to rise to 1,925 points by the end of 2014, which represents a rise of 4.5 percent from current levels.

Subscription video company Netflix Inc was the S&P's strongest performer in 2013, with a jump of almost 300 percent, followed by electronics retailer Best Buy Co Inc and semiconductor maker Micron Tech, both of which climbed nearly 240 percent. Tesla Motors was another standout, soaring 346 percent, while Facebook Inc more than doubled.

These names could see more upside this week due to "window dressing," a practice in which investors buy securities with big gains to improve the appearance of their holdings before presenting the results to clients. The 2013 year will close out on Tuesday, with the market closed on Wednesday for the New Year's Day holiday.

"Consumer discretionary and tech names have driven the market over the past 12 months, so it wouldn't surprise me to see continued upside on them next week," said Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Oklahoma.

However, Dollarhide said the names were "priced for perfection" and vulnerable to pullbacks next year.

"There won't be a sudden 'let's sell Micron and Netflix' movement, but if profit growth slows or a conference call doesn't go well, absolutely you could see a 20 to 30 percent selloff after doubling this year," he said.

The fourth-quarter earnings season will not start in earnest until the second week of January, but there will be a few clues into the economy's strength coming out next week, with data on consumer confidence and manufacturing.

Next week will also see reads on the housing market with November pending home sales on tap for Monday and the Case/Shiller report on October home prices on Tuesday. The housing sector has been in focus as U.S. benchmark Treasury yields rose to two-year highs, which could put pressure on mortgage rates, which are typically driven by the yield on the 10-year Treasury note.

"If yields stay this high, I would consider that both a technical and psychological negative for markets," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale.

Pending home sales, or sales which are in contract but not yet closed, are seen rising 1 percent while the October home prices are expected to rise 0.8 percent.

In the latest week, the Dow rose 1.6 percent while the S&P was up 1.3 percent and the Nasdaq rose 1.3 percent.

source: www.abs-cbnnews.com