SYDNEY, Nov 29 — The US dollar took a breather today as global bonds steadied from their recent rout, while equities flatlined as political risk resurfaced in Europe ahead of a referendum in Italy this weekend.
Oil prices remained jittery in the countdown to tomorrow’s Opec meeting, but there was no stopping the bull run in industrial commodities with everything from zinc to iron ore benefiting from Chinese demand.
Patchy early Asian trade saw Australian shares dip 0.1 per cent while Nikkei futures pointed to a subdued start for Japanese stocks.
MSCI’s broadest index of Asia-Pacific shares outside Japan barely budged after a couple of days of gains.
The cautious mood was set by Wall Street which suffered its worst performance in nearly a month as some investors booked profits in the financial and consumer discretionary sectors.
The Dow had ended yesterday down 0.28 per cent, while the S&P 500 lost 0.53 per cent and the Nasdaq 0.56 per cent. The pan-European FTSEurofirst 300 index fell 0.85 per cent, led by a near-4-per cent drop in Italian banks.
Worries about Italy’s banking system are building ahead of a Dec. 4 referendum on constitutional reform, which could decide the political future of Prime Minister Matteo Renzi.
“Citi’s base case is for a NO vote to prevail with political uncertainties likely to remain elevated over the near-term,” wrote analysts at Citi.
“It’s worth watching whether PM Renzi resigns in the event of a No vote as promised, before rushing into euro shorts.”
The political risk kept the euro restrained despite the pullback in the dollar. The common currency was stuck at US$1.0614, after failing to hold an 11-day high of US$1.0686.
Citi sees major chart support at US$1.0458-1.0523, a region also capturing the post-US election low of US$1.0518.
Profit-taking had pulled the dollar down to 111.81 yen, but it remains 6.7 per cent higher for the month.
The story was the same against a basket of currencies, with the dollar fading a little from 14-year peaks to stand at 101.14.
The greenback was still on track for its strongest two-month gain since early 2015, underpinned by expectations the Federal Reserve is almost certain to hike interest rates next month.
Yields on two-year Treasury paper have already hit their highest since early 2010 in anticipation, greatly fattening its premium over European and Japanese debt.
In commodity markets, investors anxiously awaited an Opec meeting tomorrow with none any wiser on whether producers will agree to lasting output cuts.
US crude was last off 26 cents at US$46.83 (RM208.93) a barrel, after seesawing wildly yesterday. Brent had finished 85 cents firmer at US$48.09.
Industrial metals extended their blistering rally, generating a welcome inflationary pulse in the global economy.
Iron ore futures traded in China surged to their highest since early 2014, while zinc touched a nine‑year peak and lead a five-year top.
Closures of steel plants in China have tightened supply while Beijing has approved a string of massive infrastructure projects, including a US$36 billion railway plan just this week. — Reuters