Asia stocks fall in Wall Street’s wake, dollar holds below 14-year peak

Reuters: Asian stocks retreated in subdued trade on Friday after Wall Street took a breather from its surge since the U.S. election, while the dollar hovered below the 14-year high set earlier this week.

European markets look set to open flat to slightly lower, with financial spreadbetter IG Markets expecting Britain’s FTSE 100 to open down 0.1% on a shortened trading day, and Germany’s DAX and France’s CAC 40 to start the day little changed.

MSCI’s broadest index of Asia-Pacific shares outside Japan, fell 0.4% to a five-month low. It was heading for a drop of 1.8% in its second consecutive week of declines.

China’s CSI 300 index dropped 0.7%, dragged lower by brokerage and insurance shares, on expectations regulators will tighten supervision over online insurance products. The index was on track to lose 1.1% for the week.

Hong Kong’s Hang Seng retreated 0.5%, and was poised for a similar weekly loss.

Japan’s Nikkei, closed for a holiday on Friday, edged up 0.1% for the week. The index has posted seven straight weeks of gains, its longest winning streak since early 2013, boosted by the yen’s weakness in the face of a surging dollar.

Overnight, U.S. equities posted their first back-to-back daily declines of the month in light trading ahead of the Christmas weekend. U.S. indices fell as much as 0.4% on Thursday.

“Santa has taken a leave of absence into the end of the week,” market strategist at IG in Singapore Jingyi Pan wrote in a note. “Asian indices could remain depressed into the end of the year.”

Wall Street stocks have been on a tear since the U.S. election on expectations that Donald Trump’s promised fiscal stimulus will boost economic growth and company profits. The Dow Jones Industrial Average .DJI has surged 8.7% since before the election results were announced.

Markets globally appeared be on pause for the holidays, with the MSCI World index down 0.1% on Thursday, and little changed on Friday.

Europe’s STOXX 600 index closed down 0.2% on Thursday, with the broader downtrend offsetting expectations of a government bailout for troubled Italian lender Monte dei Paschi di Siena, which closed at a record low on Thursday.

Early on Friday, the Italian government approved a rescue of the world’s oldest bank, after it failed to raise enough money from private investors to stay afloat.

Prime Minister Paolo Gentiloni told reporters his cabinet had authorised creation of a 20-billion-euro ($21 billion) fund to prop up Italy’s embattled banking sector, with Monte dei Paschi expected to be first in line for help.

Deutsche Bank and Credit Suisse said separately on Friday they had agreed to deals of $7.2 billion and $5.3 billion respectively with the U.S. over their sales of mortgage securities in the run up to the 2008 financial crisis.

In the foreign exchange markets, the dollar was subdued, having scaled its highest point since December 2002 on Tuesday. It has since hovered below that level, with traders unwilling to make any big moves ahead of the holiday weekend.

The dollar index, which tracks the greenback against a basket of six global peers, slipped 0.1% to 102.98, down from Tuesday’s 103.65 peak. It is poised to end the week flat.

The dollar inched down 0.2% against the yen to 117.355, and was on track for a 0.55% loss for the week.

Still, most traders retain positive bets on the U.S. currency, particularly after upbeat economic data including business spending, and an upward revision to third-quarter economic growth on Thursday.

“The trend is definitely for a stronger dollar,” Stephen Casey, senior currency trader at Cambridge Global Payments in New York. “Any dip in the dollar will a buying opportunity.”

The euro edged up 0.2% to $1.0453 on Friday, on track for a flat end to the week.