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Asia stocks, dollar drop as Trump caution outweighs China GDP

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SINGAPORE: Caution prevailed in financial markets on Friday ahead of US President-elect Donald Trump’s inauguration, even as China’s economic growth beat expectations and Federal Reserve Chair Janet Yellen toned down her earlier hawkish policy stance.


European markets were headed for a subdued start amid trepidation over Trump’s first speech as president. Financial spreadbetter CMC Markets expected Britain’s FTSE 100 to open 0.1 per cent higher, and Germany’s DAX and France’s CAC 40 to start the day little changed.


MSCI’s broadest index of Asia-Pacific shares outside Japan. US retreated 0.2 per cent, and looked set to end the week flat. Japan’s Nikkei N225 reversed earlier losses to close 0.3 per cent higher, posting a 1.1 per cent weekly loss.


China’s fourth-quarter gross domestic product growth came in at 6.8 per cent, versus forecasts of 6.7 per cent, supported by higher government spending and record bank lending.


The economy expanded 6.7 per cent in 2016, in line with forecasts. The data helped lift China’s CSI 300 index 0.8 per cent, setting it on course for a 1 per cent weekly gain.


Despite the headline growth, concerns are growing about whether Beijing can contain the financial risks from an explosive expansion in debt fuelled by years of government stimulus spending. A cooling housing market and painful structural reforms, as well as pressure on exports if Trump fulfils his protectionist promises, are also risks for China in 2017.


The dollar inched down after Federal Reserve Chair Janet Yellen said that gradual monetary adjustments were prudent, although she warned against letting the economy run hot.


The dollar index, which tracks it against a basket of six major global peers, pulled back 0.2 per cent to 100.97 on Friday. On Thursday, it initially surged on upbeat US data pointing to brightening economic prospects, before closing 0.2 per cent higher as concern about Trump’s policies returned.


The greenback slipped 0.2 per cent to 114.64 yen.


The 10-year US Treasury yield fell 0.4 per cent to 2.4613, after spiking to a 2 1/2 week high of 2.496 on Thursday.


US stocks were also restrained overnight, with the major indexes posting losses of as much as 0.4 per cent, and the Dow Jones Industrial Average down for its fourth straight session.


The euro rose on Friday, extending gains following initial losses after European Central Bank chief Mario Draghi played down a recent rise in euro zone inflation, as investors parsed his statement and noted no changes to policy. The common currency advanced 0.2 per cent on Friday to $1.068.


In commodities, oil rose on expectations of tighter supply and reports of record Chinese demand, but the gains were tempered by concerns about swelling US inventories.


US crude added 0.3 per cent to $51.53 per barrel, pulling further away from Wednesday’s one-week low. But it remains down 1.6 per cent for the week.


Global benchmark Brent LCOc1 advanced 0.3 per cent to $54.32, shrinking its weekly loss to 2 per cent. Amid nervousness about Trump’s presidency, investors took shelter in gold. Spot gold extended gains 0.2 per cent to $1,207.06 an ounce, set for a weekly increase of 0.7 per cent, its fourth straight week of gains. — Reuters


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