Asia shares down, dollar extends gains in light trading

Asian shares were fractionally lower on Friday in holiday-thinned trade but were on track for a solid advance this week, while oil and the dollar retained gains in the wake of strong US corporate earnings.

European markets were heading for a quiet start, with CMC Markets predicting Britain's FTSE 100 would open flat and France's CAC 40 would start the day down 0.1%. It forecast that Germany's DAX which on Thursday closed at its highest level since May 2015, would open 0.2% lower.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1%, with several markets closed for the Lunar New Year holiday. It was on track to end the week up 1.85%.

Japan's Nikkei closed up 0.3%, after data showed December core consumer prices fell at the slowest annual pace in nearly a year, suggesting inflation should pick up in coming months. The Nikkei posted a 1.7% gain for the week.

Markets in China were shut for the Lunar New Year holiday, and will reopen on Feb. 3. Hong Kong shares barely moved on Friday, when the market closed at midday.

Overnight on Wall Street, all three major indices hit life-time intraday highs, with the Dow Jones Industrial Average also rising 0.2% to close at a record high after breaching 20,000 on Wednesday.

The S&P 500 and the NASDAQ edged back down to end the day a touch below Wednesday's record close.

"US stock markets tend to be a sentiment leader for world markets and in what’s become a familiar pattern over recent years, the quarterly profit reporting season is supporting that sentiment," Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note.

"Around a third of companies in the S&P 500 index have now reported and overall earnings are ahead of consensus forecasts," he said.

The MSCI World index was steady on Friday. It hit a record intraday high on Thursday before ending the day about 0.1% below its previous close.

European shares climbed to a one-year high on Thursday, lifted by Johnson & Johnson's $30 billion deal to buy Swiss biotech firm Actelion.

The Mexican peso tumbled about 0.8% against the dollar on Friday after the White House said the US might impose a 20% tax on Mexican imports to pay for a border wall between the two countries.

That followed Mexican President Enrique Pena Nieto's decision to pull out of a meeting in Washington after his US counterpart Donald Trump tweeted that it would be better for the Mexican leader not to visit if his country wouldn't pay for the wall.

Trump’s office later walked back the idea of a tax, saying that was "one way" of making Mexico pay.

The dollar index, which tracks the greenback against its trade-weighted rivals, was up 0.35% at 100.73 on Friday. On Thursday, it touched a seven-week low but closed up 0.35%. The index is set to end the week flat, after market jitters following Trump's protectionist inaugural speech weighed on the dollar early in the week.

But since then, Trump's actions show "continuity from his campaign days, so the markets expect him to go ahead with the fiscal stimulus as well," said Minori Uchida, chief FX analyst at Bank of Tokyo Mitsubishi UFJ.

The dollar rose 0.4% to 115.14 yen, extending Thursday's 1.3% surge and putting it on track for a 0.5% weekly gain.

The prospect of higher US inflation boosted US 10-year Treasury yields to 2.5158% on Friday. On Thursday, they hit 2.555%, their highest level this year, before settling back down at 2.508.

The euro slid 0.15% to $1.06655 on Friday, adding to its 0.6% loss from Thursday.

In commodities, oil retained its gains from Thursday that were driven by the resurgence of risk appetites. But a jump in US inventories this week capped its advance. US crude was little changed at $53.78 a barrel, after Thursday's near 2% surge. It is poised for a 2.6% weekly increase. Global benchmark Brent eased 0.1% to $56.19, heading for a rise of 1.3% for the week.

Gold widened losses on Friday, its fourth straight session of declines, as investors dumped the precious metal for riskier, higher returning assets. Spot gold fell 0.5% to $1,182.30 an ounce, heading for a 2.3% loss for the week, its first weekly decline in five.

(Source: Reuters)