Bumper year for stocks and commodities, downer for the dollar
SYDNEY: Asian markets were ending 2017 in a party mood on Friday after a year in which a concerted pick-up in global growth boosted corporate profits and commodity prices, while benign inflation kept central banks from taking away the punch bowl.
MSCI’s broadest index of AsiaPacific shares outside Japan was consolidating three straight weeks of gains that left it near decade peaks. The index has been on an upward trajectory for pretty much all of 2017 and is up 33 percent on the year so far.
Hong Kong led the charge with gains of 36 per cent for the year, while South Korea notched up 22 per cent and India 27 per cent.
Japan’s Nikkei and the S&P 500 are both ahead by almost 20 per cent, while the Dow has risen by a quarter. In Europe, the German DAX has gained nearly 14 per cent, though the UK FTSE has lagged a little with a rise of seven per cent.
Craig James, chief economist at fund manager CommSec, said of the 73 bourses it tracks globally, all but nine have recorded gains in local currency terms this year.
“For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,” said James.
“Globalisation and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.”
The Do ended Thursday with a rise of 0.26 per cent, while the S&P 500 gained 0.18 per cent and the Nasdaq Composite 0.16 per cent.
Tech stocks were the best-performing sector in 2017, with gains of more than 37 per cent.
For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines. Craig James, chief economist at fund manager CommSec
Dollar disappoints
The US dollar bulls have not been nearly so fornate this year. The widely held assumption at the start of the year was that, with the Federal Reserve set to raise interest rates further, the only way for the dollar was up.
Yet even though the Fed delivered on its three promised hikes, the currency has failed to benefit.
Measured against its major peers the dollar has shed more than 9 percent so far this year, putting it on track for its biggest annual loss since 2003.
One winner has been the euro which was near its highest in a month on Friday at US$1.1942 and ahead almost 14 per cent for the year.
The dollar even backtracked on the yen despite the Bank of Japan staying doggedly committed to its super-easy monetary policy. As of Friday, the dollar was down 3.4 per cent for the year at 112.89 yen.
The dollar’s loss has been a boon for commodities priced in the currency, which have also benefited from a synchronised pick up in global trade and surprisingly strong demand from China.
Everything from coal to iron ore has reaped gains, with copper a stand-out performer in part due to expectations of rising demand from the mass electrification of vehicles.
The metallic conductor was near a four-year peak on Friday at US$7,286 a tonne. It is up more than 30 per cent this year and on course for its largest annual rise since 2009.
Gold has struggled somewhat this year given the background of subdued global inflation but at US$1,294.60 an ounce was still on track to end 2017 with gains of over 12 per cent.
Oil prices were near their highest in two and a half years after data showed strong demand for crude imports in China and on increased US refining activity that drew more crude from inventories.
Brent crude futures were steady around US$66.20 a barrel, up more than 16 per cent on the year so far, while US crude futures were up a cent at US$59.85 a barrel. — Reuters