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Dollar, global stocks weaken

The Trump rally is running out of steam as fresh concerns over the outlook for the US and stability in Europe weigh on the dollar and global equities.

The Bloomberg Dollar Spot Index headed for its first weekly drop since Donald Trump’s election, as billionaire bond-fund manager Bill Gross said investors betting on a windfall from the president-elect are misguided, with any benefits from increased stimulus likely to be temporary. A selloff in technology shares flowed into Asia, driving declines in Japan, Australia and South Korea, while European equities also decreased.

The yen held gains against the greenback amid caution ahead of key American jobs data, Italy’s weekend referendum and Austria’s presidential vote. Gold rallied while bonds in Australia and New Zealand extended their slide as US oil stayed near $51 following Opec’s deal to cut output.

Developed-market stocks are also on track for their first weekly retreat since the US vote, amid a let up in support for so-called reflation trades which gained ground as Trump’s victory burnished the US economic outlook and helped odds on an interest-rate hike this month to 100 percent. Italy’s referendum on reducing the power of the Senate is also weighing on risk sentiment, given a win for ‘No’ could result in the government’s ouster.

“Markets have rallied pretty strongly and we had three fantastic weeks but buying pressure certainly looks exhausted,” James Woods, global investment analyst at Rivkin Securities in Sydney said by phone. “We will see some corrective declines and profit taking. And from a technical perspective, allowing momentum indicators to unwind before gains can be sustained.”

More than five times as many stocks fell as rose on the Stoxx Europe 600 index as of 8:11 a.m. London time. The MSCI Asia Pacific Index lost 0.4 percent, with Japan’s Topix index slipping 0.4 percent and the Kospi index down 0.7 percent in South Korea. Technology and consumer-staple stocks led a 1 percent decline in Australia’s S&P/ASX 200 Index, while New Zealand’s S&P/NZX 50 Index fell 0.4 percent. 

Hong Kong’s Hang Seng Index slid 1.4 percent and the Shanghai Composite Index lost 0.9 percent. S&P 500 Index futures dropped 0.2 percent after the underlying benchmark lost 0.4 percent Thursday, retreating for the third time in four days after ending last week at a record high. 

Technology shares extended their declines since the American election, with the Nasdaq Composite Index down 1.4 percent Thursday amid concern over Trump’s trade policy and as investors rotated out of one of the year’s most favored investment sectors. The Philadelphia Semiconductor Index dropped 4.9 percent last session, the most since Britain voted to leave the European Union. 

The yen was up 0.2 percent at 113.92 per dollar, after Thursday’s 0.3 percent gain, trimming its drop in the week to 0.6 percent. The euro added 0.1 percent to $1.067 after climbing 0.7 percent in the previous session. The pound strengthened 0.3 percent and Indonesian rupiah gained 0.5 percent. Korea’s won dropped 0.4 percent while the South African rand climbed 0.5 percent.

Topics: Dollar , global stocks , US outlook , Europe stability , Bloomberg Dollar Spot Index
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