World Shares Hit Record As Strong China Data Lifts Copper

Sumitomo Mitsui Financial Group advanced 1.4 per cent and Mizuho Financial Group gained 0.8 per cent. Sompo Holdings soared 2.0 per cent and Dai-ichi Life Holdings gained 1.8 per cent.

The broader Topix advanced 0.7 per cent to 1889.74.

Currencies

What lies ahead for the $US: The US dollar, which slid nearly 10 per cent last year as per the dollar index, continues to reel three weeks into 2018.

Capital Economics on NZ's CPI: "New Zealand's fourth-quarter consumer prices data will be released on Wednesday. We anticipate that headline inflation held steady at 1.9% y/y as the boost from rising petrol prices was offset by a seasonal decline in food prices. Meanwhile, core inflation appears to have dropped back from 1.5% y/y to 1.4%."

At Malaysia's monetary policy meeting (Thursday) Capital Economics expects the central bank to hike its policy rate by 25bp, to 3.25%. This would be the first hike since 2014.

TD Securities on the outlook for Canadian interest rates: "Overall, despite some uncertainty on potential growth, Canada's economy is forecast to continue expanding at an above trend pace again this year, with wage and price pressures firming up. This suggests that the Canadian economy will be running a little hot, and is consistent with at least one more rate hike this summer, possibly two, particularly if NAFTA uncertainty diminishes or consumer spending continues to defy expectations." It sees rates rising to 1.5 per cent or 1.75 per cent this year.

Bank of Montreal: a Canadian rate bull: "For the record, we continue to look for two more rate hikes this year, followed by three in 2019, taking the overnight rate to 2.5 per cent by that point (the low end of the Bank's perceived neutral range)."

Capital Economics is both bullish and bearish on Canadian rates: "After one more rate hike next quarter, to 1.50 per cnet, we expect a slump in the economy caused by a worsening house price correction to prompt the Bank to reverse course and cut interest rates." That will take the wind out of the $C which will slide to US75¢ from about US80¢; the decline will be checked by rising oil prices, Capital Economics said.

Bank of Montreal on US bond yields: "Yield curves are flattening, but they're not flat. True, the 10s-2s spread for Treasuries has skied downhill by 200 bps in little more than four years to 58 bps now. But we would point out that the curve was even flatter for much of the second half of the 1990s, when the economy and markets boomed. Sidebar: Canada's curve is much flatter, especially after this week's as-expected 25 bp BoC rate hike (10s-2s spread is 43 bps), but few are fretting... yet."

Commodities

China's ferrous futures, having trended downward Thursday night, surged across the board on Friday afternoon, Metal Bulletin said. A futures trader in Beijing attributed the rebound to technical reasons and lingering expectations of a round of restocking for steel and iron ore before the Chinese New Year in mid-February. China will break for a week from February 15 for the holiday. 

In highlights from its latest monthly report, the International Energy Agency reiterated that it is forecast a slowdown in the pace of demand growth this year "mainly due to the impact of higher oil prices, changing patterns of oil use in China, recent weakness in OECD demand and the switch to natural gas in several non-OECD countries".

Lower North Sea and Venezuelan output in December was offset by more production from non-OPEC countries. The IEA said if, as it's reasonable to assume, that Venezuela sees further declines in output "producers with the flexibility to deliver oil similar in quality to Venezuela's shipments to the US and elsewhere, including China, might decide to step in with more barrels of their own". 

The IEA is bullish on US output. "Rapid US growth and gains in Canada and Brazil will drive up non-OPEC supply by 1.7 mb/d in 2018, versus last year's 0.7 mb/d increase. US crude supply will push past 10 mb/d, overtaking Saudi Arabia and rivalling Russia," the agency said.

The IEA also said global refining throughput hit a record in the final three months of 2017 at 81.5 mb/d, instead of falling seasonally. The US returned to pre-hurricane highs in December and China's refiners ran at their highest ever quarterly level. Margins suffered further from both product stock builds and the rally in crude oil prices.

Falling stockpiles and pollution alerts in top metals producer China fuelled supply concerns and helped to drive zinc and lead prices to multi-year highs and aluminium to a two-week peak on Friday.

Demand for metals looked strong after data showed economic growth in China, the world's biggest consumer, accelerated for the first time in seven years.

"Based on the fundamentals and the technicals, prices are going to hit some new highs again," said Robin Bhar, head of metals research at Societe Generale.

Benchmark lead on the London Metal Exchange touched $US2630.50 a tonne, its highest since August 2011, in early deals before closing down 1.1 per cent at $US2581.

LME zinc did not trade at the close but was bid 1.2 per cent higher at $US3416 a tonne after touching $US3444, the highest since 2007. The metal used to galvanise steel was on track for a sixth week of gains.

LME aluminium finished 1 per cent down at $US2219 a tonne after earlier hitting $US2270.50, the highest since January 2.

Copper ended 0.5 per cent lower at $US7041 a tonne, nickel closed up 2 per cent to $US12,720 and tin finished 0.9 per cent higher at $US20,600.

Australian sharemarket

The S&P/ASX 200 sharemarket index slipped 9 points on Friday to​ 6006 points, and shed 64 points, or 1.1 per cent, over the week. Friday's session marked the fourth consecutive daily fall for the benchmark measure, although the last two sessions combined only subtracted a combined 10 points.

Retailing stocks were the best performers over the week, with stocks in the discretionary sector adding 1 per cent and staples 0.9 per cent. Health stocks were the only other corner of the ASX to record gains over the five days, with energy and telecommunications sectors the hardest hit as both dropped around 4.5 per cent.

The economy took centre stage last week, after consumer confidence hit more than a four-year high on Tuesday, according to a monthly survey jointly conducted by Westpac and the Melbourne Institute. Official statistics on Thursday showed jobs in 2017 grew at their fastest annual pace since the GFC, although the unemployment rate ticked higher, tarnishing the results.

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Street Talk

National Australia Bank is believed to be considering spinning off and floating its funds management, superannuation and financial advice operations in a deal that could be big enough to create a top-100 listed company.

UBS Asset Management is seeking a buyer for its 60 per cent stake in Western Australia's biggest renewable energy producer, Collgar Wind Farm.

Street Talk can reveal retail billionaire Brett Blundy's BBRC plans to restock its acquisition warchest with a $500 million-odd private equity style fund, targeting institutional and high net worth investors.

with Reuters, Bloomberg, AAP

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