World shares have fallen and the US dollar slipped against major and heavyweight emerging market currencies, as nagging uncertainty about a US tax cuts package dovetailed with broad-based end-of-year caution.
It was a groggy end to what was still set to be a third week of gains for MSCI’s global stock index following more upbeat data and signs that central banks including the Federal Reserve will keep treading carefully with interest rate hikes.
Japan’s Nikkei had followed Wall Street lower overnight. Europe slipped too as a 15 per cent slump in fashion giant H&M and near 9 per cent drop Italian luxury goods firm Ferragamo spooked retailers.
Banks struggled too on a renewed dip in euro zone bond yields after Thursday’s message from the European Central Bank that it was sticking to its pledge to keep money pouring into the bloc’s economy for as long as needed.
“The theme is still one of gradual policy tightening,” said Societe Generale interest rates strategist Jason Simpson, who said the Bank of England had also sent a steady-as-you-go signal at its meeting the previous day.
“Today is also going to be the last one (this year) of any real flow… so bond yields are just squeezing lower as any short positions are being covered.”
In the currency markets, the dollar was down at 112.195 against the yen and, despite having been at a one-month high earlier in the week, stuttering towards a 0.3 per cent weekly drop against a basket of six rival currencies .
Ongoing wrangling in the US Congress over a bill to cut taxes on Thursday dented confidence that the reforms would be pushed through in their current state. Two more Republican senators insisted on changes.
Florida’s Marco Rubio, a former presidential contender, told reporters on Capitol Hill that if the bill’s proposed refundability to taxpayers of the child tax credit was not expanded, “I’m a no”.
“The more the tax bill gets watered down, the less pronounced the effect will be on the dollar.” said Commerzbank currency strategist Esther Reichelt, in Frankfurt.
The New Zealand dollar was the biggest mover among major currencies, up 0.6 per cent at a two-month high of $US0.7029 ($A0.9841) after the country’s Finance Minister Grant Robertson said he was comfortable with the currency’s general trend.
Bitcoin was on track for its smallest weekly move since October, having turned less volatile following the start of trading of Cboe Global Markets’ bitcoin futures. Rival CME Group will launch its own version on Sunday.
The cryptocurrency was changing hands close to a record high around $US17,000 ($A23,800) on the Bitstamp exchange, having climbed around 15 per cent since Monday – the fifth straight week of gains.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.4 per cent overnight, but clung on for a 0.8 per cent gain for the week.
Japan’s Nikkei stock index finished 0.6 per cent lower at its lowest in more than a week, with mobile firms extending a sell-off on concerns of increased competition after e-commerce group Rakuten said it aims to become the country’s fourth wireless carrier. The index is down 1.1 per cent for the week.
Big Japanese manufacturers’ business confidence improved for a fifth straight quarter in the three months to December to hit an 11-year high, the Bank of Japan’s quarterly tankan survey showed.
Chinese shares had also drooped, with the Shanghai Composite index off 0.8 per cent and the blue-chip CSI300 index down 1.1 per cent.
“The Nikkei came off its lows in the afternoon, largely on futures-led buying,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust. “But regional sentiment is still fragile, which will limit its upside.”
In commodity markets, crude oil futures extended gains, after rising on Thursday as a pipeline outage in Britain continued to support prices despite forecasts showing a global crude surplus in the beginning of next year.
US crude added 0.3 per cent, or 15 cents, to $US57.19 ($A80.07) a barrel, after gaining 0.8 per cent overnight. Brent crude futures were up 0.2 per cent, or 14 cents, at $US63.45 ($A88.83).
Industrial metal copper, headed for a 3 per cent weekly gain after two weeks of hefty falls while gold edged away from a four month low hit earlier in week as it nudged up to $US1257 ($A1760) an ounce.