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Sydney - European shares declined while US futures gained as investors await the start of Donald Trump’s presidency.
The dollar weakened after Janet Yellen made the case for the Federal Reserve to gradually raise interest rates.
The Stoxx Europe 600 Index was headed for its worst week since early November. US futures edged higher after the underlying gauge slid to a two-week low on Thursday.
The greenback pared steeper declines after slipping against its major peers on the Fed chief’s speech. Gold headed for a fourth weekly climb.
The Shanghai Composite Index rose the most in more than two weeks as China’s economic growth accelerated for the first time in two years in the final quarter of 2016.
Rallies in the dollar and equities are easing this week before Trump is sworn in as the 45th American president, with investors growing anxious for indications the administration will follow through on pro-growth campaign promises.
Billionaire investor George Soros said the euphoria among stock investors since Trump’s victory will end as uncertainty takes over.
The Dow Jones Industrial Average has churned in its tightest range ever over the past month.
"It’s clear that investors have reached a level where they are prepared to wait and see what the Trump administration has to offer," said Ric Spooner, chief market analyst at CMC Markets Asia Pacific in Sydney.
In a speech at the Stanford Institute for Economic Policy a day before Trump’s inauguration, Yellen argued that the Fed wasn’t behind the curve in containing inflation pressures but nevertheless can’t afford to allow the economy to run too hot.
In a separate speech on Wednesday, Yellen said the Fed was close to achieving its goals of full employment and stable prices.
The odds of another Fed rate hike as soon as May have risen to 50% from 42% a day ago, futures contracts show.
China’s economic data cemented an economic stabilisation that’s giving leaders a buffer as they transition to neutral policy and prepare for potential trade tensions with Trump.
GDP increased 6.8% in the three months through December from a year earlier, compared with a 6.7% median estimate in a Bloomberg survey.
Here are the main moves in markets:
Currencies
The Bloomberg Dollar Spot Index was down 0.1% as of 8:41 in London after falling as much as 0.3%.
The gauge is heading toward its fourth straight weekly loss despite touching the highest level in more than a decade earlier this month.
Treasury Secretary nominee Steven Mnuchin told lawmakers the long-term strength of the US dollar is important and Trump’s comments that the currency was too high weren’t meant as a longer-run policy.
The euro, Swiss franc and Canadian dollar were all up 0.1%, while the pound was down by that amount. The yen rose 0.1% to 114.76 per dollar after falling as much as 0.3%.
The Korean won gained 0.6% for a third straight weekly gain. The yuan erased gains on a report of a temporary reserve requirement ratio cut in China.
The onshore yuan was still headed for its fifth straight weekly gain.
Stocks
The Stoxx Europe 600 Index was down 0.3%, taking the week’s loss to 1.1%. Futures on the S&P 500 Index rose 0.1%. The underlying cash index fell 0.4% to the lowest in two weeks on Thursday.
The Dow declined for a fifth straight day, the longest losing streak since Trump’s election victory.
The Shanghai Composite gained 0.7%. The ChiNext Composite Index, a measure of small companies, rose the most since October on speculation small-cap stocks will benefit from a plan to ease index-trading restrictions.
The Topix index climbed 0.4% as insurers surged.
Commodities
Gold was 1 204.16 an ounce, erasing a gain of as much as 0.4%. The metal is on course for a fourth weekly climb. It is up 0.6% this week, touching the highest level since November on Tuesday.
Bonds
The yield on 10-year Treasuries was flat at 2.48%, erasing previous declines.
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