Last updated Tuesday, December 06, 2016 11:50 pm GMT+8

Tuesday November 29, 2016
05:18 PM GMT+8

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A man looks at an electronic board showing the graphs of the recent fluctuations of the exchange rate between Japanese yen against the US dollar (right) and the graphs of the Japan’s Nikkei average outside a brokerage in Tokyo February 29, 2016. — ReuA man looks at an electronic board showing the graphs of the recent fluctuations of the exchange rate between Japanese yen against the US dollar (right) and the graphs of the Japan’s Nikkei average outside a brokerage in Tokyo February 29, 2016. — ReuSYDNEY, 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 wobbled on doubts Wednesday’s Opec meeting would deliver a lasting deal, and even industrial commodities ran into profit-taking after their meteoric rise.

The action in Asian stocks was just as guarded with Australia flat, the Nikkei off 0.35 per cent and Shanghai ahead by 0.5 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan barely budged after two days of gains.

E-mini futures for the S&P 500 were fraction softer, while spread betters pointed to opening losses for the major European bourses.

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 December 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.”

Red hot metal

The political risk kept the euro restrained despite the pullback in the dollar. The common currency was pinned at US$1.0600 (RM4.73), 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.

The dollar was again moving higher on the yen to reach 111.97, after profit-taking pulled it down as far as 111.58. It remains 7 per cent higher for the month.

Dealers reported Japanese buying for the new month with orders today settling on December 1. Against a basket of currencies, the dollar held at 101.280 and not far from last week’s 14-year peak.

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 29 cents at US$46.79 a barrel, after seesawing wildly yesterday. Brent eased 32 cents to US$47.92. Traders fear a major selloff should Opec fail to reach a deal after so much wrangling.

Industrial metals turned mixed after their blistering rally, which promises to generate a welcome inflationary pulse in the world economy.

While copper eased 2 per cent it is still heading for the biggest monthly gain in more than a decade. Iron ore futures were near 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. — Bloomberg

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