U.S. stock valuations get trickier as trade tensions rise

Trade tensions that have simmered in the background for investors are starting to boil over into a more severe problem for the U.S. stock market.

The latest developments involving a trade dispute pitting the United States against China and other countries are creating such uncertainty that investors are struggling to value stocks at a time strong corporate profits would otherwise bolster stocks as the bull market extends into its 10th year.

Although concerns over a global trade war have loomed over the stock market since March, the issue has barged into the foreground in recent days, as motorcycle maker Harley-Davidson Inc (HOG.N) and Mercedes-Benz maker Daimler (DAIGn.DE) warned of a financial toll from the trade tensions.

Investors, meanwhile, are reconsidering whether statements from U.S. President Donald Trump and his administration may be more than just an effort to gain leverage in any trade negotiations.

The dilemma of weighing trade concerns was cast into stark relief for investors on Monday when the S&P 500 dove 2 percent amid conflicting signals from the Trump administration over proposed restrictions on foreign investment in U.S. technology companies.

The benchmark index recovered somewhat to close down 1.4 percent, but still marked its biggest single-day decline in nearly three months. The S&P 500 rebounded modestly on Tuesday, ending up 0.2 percent.

Dow Theory - Market turmoil isn't signaling a coming crash

Global Stock Markets

Panic is a bad investment strategy.

Yet that is exactly how many investors reacted earlier this month when the stock market dropped precipitously. They indiscriminately dumped their stocks at whatever prices they could get.

Odds are good that they will end up regretting their behavior.

I say that not just because the stock market has recovered some over the last few sessions. It is still possible that a bear market did begin from the late-January market highs. But since most scary drops do not lead to major bear markets, it’s virtually assured that — over the long term — selling after every unnerving decline will lead to more losses than gains.

If you’re not a long-term buy-and-hold investor, therefore, you need an investment system that keeps you from panicking every time the market starts heading south. 

The Dow Theory is the oldest and perhaps the most popular of such systems. Like any good investment discipline, it provides you with preset rules that try to differentiate between less serious bouts of market volatility and the beginnings of devastating bear markets.

Currently, followers of the Dow Theory are giving the stock market the benefit of the doubt.

The Dow Theory was created in the early part of the last century by William Peter Hamilton, then editor of The Wall Street Journal. He introduced the strategy in a series of editorials in the newspaper up until his death in 1929. He advised readers to focus not on the initial pullback from market highs but on the market’s attempt to recover from that pullback. A bear market signal would be triggered if that recovery were so weak that either the Dow industrials or the Dow transports would fail to close above their previous highs, and then both Dow averages would break below their lows hit in the initial pullback.

Here’s how that applies to the current market: If in coming weeks the Dow industrials surpass their Jan. 26 closing high of 26,616.71 and the Dow transports close above their Jan. 12 record finish of 11,373.38, then the Dow Theory would consider the bull market alive and well.

By contrast, a bear market signal would be triggered if either the Dow industrials or transports couldn't beat their January highs, and both close below their early February lows—23,860.46 in the case of the industrials and 10,136.61 for the transports.

Until then, Dow Theorists wait, letting the market tells its story. And one of the key tenets of Hamilton’s approach is that the market’s major trend is presumed to remain in force until formally reversed. That’s why the Dow Theory currently is giving the bull market the benefit of the doubt.

Note carefully that the Dow Theory isn’t designed to catch the exact tops and bottoms of bull and bear markets. By requiring a decline from market highs to prove itself before a bear market is declared, for example, the strategy is guaranteed to suffer losses at the beginning of a bear market. The same goes in reverse when a bear market gives way to a new bull market.

But there never has been a market timing system that consistently catches the exact day of bull market tops and bear market bottoms, and there never will be. 

And the perfect is the enemy of the good. Jack Schannep, editor of TheDowTheory.com, one of the country’s leading Dow Theorists, put it this way: “The genius of investing is recognizing the direction of the trend — not catching the highs or the lows.”

One confirmation of the Dow Theory’s value comes from a study conducted in the 1990s by three finance professors – Stephen J. Brown of New York University, William Goetzmann of Yale University, and Alok Kumar of the University of Miami. 

They tested the Dow Theory over the nearly 70-year period from 1930 (the year following Hamilton’s death) to the end of 1997, finding that it beat a buy-and-hold by an annual average of 4.4 percentage points per year.

NZ shares down: Kathmandu, Contact drop while Fletcher, CBL remain halted

Newzeland Stock Markets

New Zealand shares dropped, led by Kathmandu Holdings and Fisher & Paykel Healthcare, while NZX gained.

The S&P/NZX50 Index fell 33.31 points, or 0.4 percent, to 8,059.06. Within the index, 26 stocks fell, 17 rose and 7 were unchanged. Turnover was $151 million.

The market was expecting an announcement from Fletcher Building this morning increasing the losses at its building and interiors (B+I) unit.

The company was set to come out of the trading halt it was placed in last week at $7.77, but instead has extended the halt until Wednesday, saying it has yet to complete a review of key projects and has begun talks with lenders about breaching covenants.

CBL Corp also remained in a trading halt at $3.17.

The insurer says it hasn't worked out how much capital it needs to raise to satisfy regulatory solvency concerns and to finalise any transaction.

The stock was suspended from trading on the NZX last week as stock market operator NZX tries to work out whether CBL has kept the market informed of material information and met continuous disclosure obligations.

Kathmandu Holdings led the index lower, down 2.1 percent to $2.30, with Fisher & Paykel Healthcare down 2.1 percent to $12.45 and Ryman Healthcare dropping 1.9 percent to $10.50.

Contact Energy dropped 0.4 percent to $5.32.

It first-half adjusted earnings fell 11 percent to $236 million as the electricity generator-retailer dealt with a dry spell which sapped its hydro generation in what it described as a "highly competitive" market.

Net profit sank 40 percent to $58 million, or 8.1 cents per share, which it said was due to a greater reliance on thermal power supply. Revenue rose 15 percent to $1.19 billion.

NZX was the best performer, up 2.7 percent to $1.13.

A report by the New Zealand Institute of Economic Research, commissioned by the stock market operator, says NZX's role in keeping the cost of capital relatively low gives a $2.4 billion kicker to the broader economy.

Property For Industry gained 0.6 percent to $1.65. Its annual profit more than halved to $51.7 million as it bore the cost of buying out its management contract and reaped a smaller fair value gain on investment properties.

Gold claws back lost ground after Friday's slide

Global Stock Markets

Softer tone to dollar takes pressure off gold. Silver firms after biggest 1-day drop since Dec. 2016.

 

Gold edged up on Monday, clawing back some lost ground after posting its biggest one-day loss in two months in the previous session as a softer tone to the dollar took some pressure off the metal. 

Gold fell 1.2 percent on Friday after stronger than expected U.S. payrolls data shored up expectations that a pick-up in inflation will spur further U.S. interest rate hikes this year, boosting the U.S. 

currency, in which it is priced. Having rallied in the wake of the data, the dollar eased 0.1 percent against the euro on Monday. 

 Spot gold was at $1,336.15 an ounce at 1030 GMT, up 0.2 percent but well below late-January's 17-month high of $1,366.07. 

U.S. gold futures for April delivery were $2.10 an ounce higher at $1,339.40. 

Stock markets were routed around the globe on Monday and bond yields rose as resurgent U.S. inflation raised the possibility central banks would tighten policy more aggressively than had been expected. 

While gold is often considered an inflation hedge, Julius Baer said in a note, the fact that price pressures were being driven by confidence about growth rather than dollar weakness and rising oil prices meant it was failing to react positively. 

Futures markets reacted after the jobs data by pricing in the risk of three, or even more, rate rises from the Federal Reserve this year. 

As well as their impact on the currency markets, rising interest rates weigh on gold in their own right, as they increase the opportunity cost of holding non-yielding bullion. 

Meanwhile, hedge funds and money managers raised their net long position in COMEX gold contracts in the week to Jan. 30 to their highest level since late-September, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday. 

Spot silver was up 1.1 percent at $16.80 an ounce, having earlier matched the previous session's five-week low of $16.54. 

The metal fell 3.7 percent on Friday in its biggest one-day decline since Dec. 2016. Platinum was up 0.7 percent at $992.90 an ounce, while palladium , which alone among the major precious metals posted gains on Friday, was down 1.1 percent at $1,035.50 an ounce.

Where Netflix goes, Big Tech may follow

Netflix Inc’s (NFLX.O) quarterly report on Monday may offer an advanced preview of whether Facebook Inc (FB.O), Amazon.com Inc (AMZN.O) and other heavyweights behind much of the U.S. stock market’s record-breaking rally can keep delivering.

Many of the S&P 500’s largest companies - Microsoft Corp (MSFT.O), Apple Inc (AAPL.O), Alphabet Inc (GOOGL.O), and Amazon.com - have outperformed in the first 12 trading days of 2018, with investors betting strong earnings growth will justify tech valuations at their highest levels in a decade.

As of Thursday, Netflix, which is due to report its quarterly results on Monday after the stock market closes, had jumped nearly 15 percent this year, outpacing the S&P 500’s 5 percent increase.

Netflix’s 53 percent surge in 2017, along with rallies by shares of Amazon.com and Silicon Valley’s largest tech companies, helped propel the stock market to new highs.

Strong China data cranks up pressure on bond markets

Strong Chinese data on Thursday kept world stocks hovering near record highs, as bond markets pushed U.S. Treasury yields - the benchmark for global borrowing costs - to a 10-month high.

 Underlining the momentum of the world economic expansion into the back end of last year, both Chinese fourth quarter growth of 6.8 percent and December industrial output growth of 6.2 percent were ahead of expectations.

Most Asian bourses were closing when the data landed but had briefly set a new an all-time record after the U.S. bluechip Dow Jones Industrial index had closed above 26,000 points for the first time.

China's yuan <CNY=CFXS > finished at its highest since December 2015. Europe's main FTSE, Dax and CAC40 stock markets then ticked higher though moves were choppy in the cross currents of rising euro EUR= and bond yields.

Wall Street opens higher as tech stocks gain

Wall Street’s main indexes opened higher on Wednesday, led by gains in technology stocks including Microsoft and IBM.

The Dow Jones Industrial Average rose 156.43 points, or 0.61 percent, to 25,949.29. The S&P 500 gained 9.75 points, or 0.351172 percent, to 2,786.17. The Nasdaq Composite added 33.63 points, or 0.47 percent, to 7,257.31.

Wall Street set to open higher on final trading day of 2017

U.S. stocks were poised to open on a bright note on the final trading day of 2017, wrapping up a year in which major Wall Street indexes recorded their best performance since 2013.

Investors were treated to bumper gains in the year, with strengthening global economy, solid corporate earnings and low interest rates fueling the nine-year old rally in global stocks.

The market has shown surprising strength despite tensions in North Korea and political upheavals in Washington. The S&P 500 has closed below 1 percent only four times this year.

Nasdaq 100 e-minis NQc1 were up 18 points, or 0.28 percent, on volume of 13,512 contracts.

U.S. oil prices hit their highest since mid-2015 as an unexpected fall in American output and a drop in commercial crude inventories stoked buying. [O/R]

Shares of Schlumberger (SLB.N) were up 0.8 percent in premarket trading, while those of Exxon (XOM.N) edged up 0.1 percent.

FTSE hovers, set for a weekly gain despite financials dragging

Britain’s major stock index steadied on Friday at the end of a busy week of central bank meetings, with financials sagging again while BT was boosted by a deal with Sky.

The FTSE 100 inched around 0.1 percent lower in line with mid- and small-cap indices. The leading companies index was set for a small gain on the week, having hit its highest level in a month on Wednesday.

Financials weighed heaviest, continuing their slide from the previous session as investors’ building enthusiasm around bank stocks - expected to gain from U.S. tax reform and rising interest rates - dissipated.

HSBC, Standard Chartered and Barclays fell 0.6, 0.9 and 1.4 percent, the top drags to the FTSE 100.
BT rose 1.1 percent after striking a deal with Sky to carry each other’s channels.

Domestic stocks were a touch weaker, as investors awaited the fallout from the second day of the EU summit.

Overall on the FTSE 100, analysts have persistently been revising earnings expectations lower. 

Dollar knocked by New York explosion, Bitcoin futures steal spotlight

An explosion in central New York pushed the dollar lower on Monday, but stock markets recovered after an early dip, once it became clear the situation had been contained.

New York police said the explosion rocked the Port Authority Bus Terminal about 7 a.m. local time (12 noon GMT), as the Monday morning rush hour was getting under way. Three injuries were reported and a suspect was in custody.

The S&P 500, Dow Jones and Nasdaq indexes rose 0.1 to 0.3 percent when the main U.S. stock markets opened two and a half hours later.

The dollar slipped as far as 113.245 yen JPY= against the Japanese currency. The Swiss franc, a refuge at times of heightened risk, reached a high of 1.16755 francs per euro. EURCHF=. 

But the spotlight was on the debut of Bitcoin futures contracts, which allow investors to bet on the price of the cryptocurrency in one, two or three months.

Euro heads higher as ECB heads for the exit

The euro climbed for a third day and stocks slipped to a month low on Thursday, as traders waited for formal confirmation from the European Central Bank that will take its biggest step yet in unwinding years of loose monetary policy.

Banking stocks were also in focus as Europe’s Deutsche Bank <DBKGn.DE > and Barclays (BARC.L) both tumbled after results, and South Africa’s markets lurched lower again after its budget on Wednesday had rattled investors. 

In a pre-ECB appetiser, Sweden and Norway’s central banks both kept their interest rates on hold. Their currencies barely budged though as attention remained firmly on a euro camped at a 1-week high of $1.1820 and up 12.5 percent for the year. [/FRX] 

The ECB will announce its policy decision at 1145 GMT and hold a news conference at 1230 GMT.

It is expected to say that from the start of next year it will be pumping either 30 or 40 billion euros a month into euro zone bond markets, rather than the current rate of 60 billion a month. 

Markets will also be looking at how long it plans to maintain that new rate and for any tweak in language on when it may start actually raising its currently negative interest rates.

“The pace they decrease the bond buying is the important factor, I would say they cut (the purchases) by 20 billion (a month) considering how the market is,” said SEB investment management’s global head of asset allocation, Hans Peterson. 

European bonds, which like other global fixed income markets have seen a selloff over the last week, remained subdued. 

Benchmark German Bund yields DE10YT=TWEB hovered at just over 0.47 percent after U.S. Treasury yields US10YT=RR had hit a seven-month high of 2.4750 percent overnight. [GVD/EUR]

European shares struck 4-week lows too before they managed to steady. 

While bank stocks .SX7P were the main drag, former mobile phone giant Nokia (NOKIA.HE) was the biggest individual faller as weak earning from its now mainstay networks equipment business sent its shares down as much as 14 percent. [.EU]

Dollar, world stocks surge on U.S. economic outlook

Stock markets climbed worldwide on Monday, lifted by optimism over the outlook for corporate earnings and U.S. President Donald Trump’s tax reform plan, while the dollar gained as investors took a bullish view of the American economy.

The three major U.S. stock indexes closed at record highs, driven by the notion that economies around the world are growing in sync and inflation is low, giving the Federal Reserve and other central banks little reason to squelch the expansion.

Spanish borrowing costs rose and stocks fell as a violent police crackdown on an independence vote in Catalonia rattled investors, but major European bourses gained on travel stocks and the mining sector was helped by higher metals prices.

U.S. manufacturing surged on strong gains in new orders and raw material prices, while rebounding construction spending in August bolstered the economic outlook even as hurricanes Harvey and Irma are expected to dent third-quarter growth.

The Institute for Supply Management (ISM) said its index of U.S. factory activity rose to 60.8 last month, the highest reading since May 2004, from 58.8 in August.

The Year Seven Phenomenon

If there’s anything we’ve learned about these markets over the last several years, it’s that they’re capable of anything. We’ve also learned to expect a dramatic move when one would least expect it. Yesterday’s reversal was about as indiscriminate as anything we’ve seen since just before the election, and it came at a time very few expected it.

However, if you follow the markets daily activity as closely as we do, then you’ve probably come to learn these markets have had a very consistent habit of breaking down on new highs, but which new highs has always been the question. Truth is, sometimes these markets have broken down on new highs and sometimes they haven’t, but one thing’s for sure – when they have reversed themselves sharply, it has usually always come when the bulls start to get a little too giddy.

Recently investors have been asking about the potential for a major market pitfall based on the Year Seven Phenomenon. This refers to the historical tendency of stocks to experience a significant setback in the seventh year of the decade.

Let’s look back at the long-term track record of the years ending in 7, starting with 1887. There were above-normal market pullbacks in each of the following years: 1887, 1897, 1907, 1917, 1937, 1957, 1977, 1987, 1997, and 2007. The tendency in most of these years was for the market to witness most of its losses in the third or fourth quarters.

Not all of those volatile years witnessed a net loss, however. It may surprise you that the notorious market crash of 1987 didn’t completely erase the gains for that year. Nor did 2007, the prelude to the 2008 credit crash, end on a negative note (the Dow in fact gained 750 points that year). Other years falling under the sway of the Year Seven Phenomenon witnessed impressive gains despite temporary setbacks in the third quarter of the year. Examples include 1997 and 1967.

All of this is to say that even the most reliable of historical patterns should be taken with a large grain of salt. Investors should be careful about assuming the worst case scenario for 2017, even in light of the stock market’s recent internal weakness. While a deeper market decline is certainly possible before the summer is over, the factors which historically contribute to major panics – investor exuberance (1987 & 1997), financial sector instability (1907 & 2007) – aren’t currently present. The odds are therefore against a panic decline this summer.

More importantly, whatever weakness the broad market may experience between now and October should lead to another ideal buying opportunity. With the market fairly valued, the economy steadily growing, and the financial sector firm, there is no reason to assume that temporary weakness will lead to anything other than an internal cleansing of a still-healthy bull. Conversely, should these markets simply continue lower, we’re clearly not going to want to step in the way until they’ve achieved what we believe to be a key technical bottom.

Euro's losses deepen before Jackson Hole

The euro slipped on Monday, extending its biggest weekly decline in more than two months as markets judged the single currency's double-digit gains this year may be too much for a central bank that is still wary of removing stimulus. 

The single currency fell 0.17 percent to $1.1740 against the U.S. dollar, after weakening 0.5 percent last week, its biggest weekly decline since June. 9, according to Reuters data. (Graphic: World FX rates in 2017.

It is still up more than 11 percent so far this year, making it the best performing currency in the G10 currency universe. 

"Absent some Mario Draghi fireworks this week, buying on dips for euro/dollar may be a better strategy rather than chasing the euro higher at these levels," said Viraj Patel, an FX strategist at ING Bank in London. 

European Central Bank President Mario Draghi will not deliver a new policy message at a Fed conference in Jackson Hole this week, two sources familiar with the situation have said, tempering expectations for the ECB to start charting the course out of stimulus. 

But traders are not taking any chances. About $45 billion of euro-dollar currency options on the exchange rate will expire in the three days leading up to the Wyoming meeting. 

With markets hemmed in tight ranges and the lack of any top tier data this week, the dollar index .DXY drifted higher to 93.56 on Monday with latest positioning data showing speculators reducing their bearish bets against the greenback.

Investors cut short dollar bets, particularly against the Japanese yen with positioning seen stretched before Janet Yellen's speech on Friday at the Jackson Hole conference.

The dollar Slipped, Oil Prices Rose Two-Month High

In the currency market, the euro EUR= traded at $1.1832, having risen to as high as $1.1846, its best level since January 2015, with a test of $1.20 within sight.

It has gained almost 15 percent from its January 3 low of $1.0340, which was its weakest level since January 2003, on rising expectations that the European Central Bank will taper its stimulus next year. 

The dollar also slipped to a 1-1/2-month low of 110.005 yen JPY=, and last stood at 110.18 yen, down 0.1 percent. 

The dollar's index against a basket of six major currencies was at 92.878 .DXY, not far from a 13-month low of 92.784 plumbed overnight. The index had marked its fifth straight monthly decline in July, the longest consecutive retreat since its losing run marked from the end of 2010 through early 2011. 

The Australian dollar gained 0.4 percent to $0.8034 AUD=D4, helped by the strong Chinese data, ahead of the Reserve Bank of Australia's policy announcement later in the day. The RBA is widely expected to keep interest rates on hold. 

The Chinese yuan hit 10-month highs in both onshore CNY=CFXS and offshore CNH=D4 trade.

U.S. political turmoil also weighed on the dollar after U.S. President Donald Trump dismissed his communications director, Anthony Scaramucci, just over a week after naming him to the job.

Oil prices rose to two-month highs on Monday, on expectations of U.S. sanctions against Venezuela's oil sector after Sunday's election of a constitutional super-body in Caracas, which Washington denounced as a "sham" vote. 

Oil prices maintained gains even after the U.S. Treasury Department late on Monday announced sanctions limited only to Venezuelan President Nicolas Maduro. 

Brent crude futures LCOc1 traded at $52.81 per barrel after having hit a high of $52.92 on Monday.

Copper CMCU3 rose 0.2 percent to $6,380 per tonne, holding near Monday's two-year high of $6,430 and its 2015 peak of $6,481.

Oil bounce, results keep stocks on high

Oil's rise back above $50 a barrel helped prod stock markets higher on Wednesday and company results and economic data continued to soothe worries that the world economy may be ripe for a another slowdown.

European stock markets were mainly higher, led by energy and commodity-linked companies after Brent crude topped the $50 mark for the first time since early June. 

A slightly less bullish performance in Asia pulled the MSCI world equity index, which tracks shares in 46 countries, off all-time highs overnight. But early in the European session, it was up 0.1 percent on the day. 

Strong results from energy firms Subsea 7 and Tullow Oil helped European shares while banks weighed on index-level gains as investors awaited a Fed policy decision and UK GDP figures.

The pan-European STOXX 600 gained 0.3 percent, in line with euro zone stocks and blue-chips, as oil and gas stocks gained 0.8 percent. 

Germany’s Ifo business survey on Tuesday showed confidence soaring to record highs in July amid what its economists described as a ‘euphoric’ mood in German industry while U.S. consumer confidence levels jumped to near 16-year highs. 

The latter numbers helped the dollar recover some ground in U.S. and Asian trading on Tuesday, with traders citing a trimming of positions ahead of the Fed meeting, not due until late in the U.S. session. (1800 GMT) 

The dollar, hurt since March by a retreat in expectations for further rises in interest rates this year, gained just over 0.1 percent against both the euro and the euro-dominated basket of currencies most used to measure its broader strength.

Cautious Fed sends stocks to record highs, dollar dips

Global stocks scaled record highs on Friday, capping their best week in over two months as the dollar stayed close to nine-month lows, with bets on a gradual U.S. Federal Reserve rate hike path and hopes for a strong earnings season boosting risk appetite.

After a scare at the end of last month, when stock markets skidded on the view that the era of easy money might be coming to an end across the globe, investors have been soothed by a run of more dovish comments from central bankers. 

Dallas Fed President Robert Kaplan on Thursday advocated a go-slow approach to further tightening after two hikes so far this year, saying he first wants to see more evidence that inflation is heading back up to the Fed's 2-percent goal. 

Fed Chair Janet Yellen also said on Thursday that the central bank's further rate hikes could be gradual, given persistently low inflation despite an improving economy. 

European shares were poised for their best week since late April as investors piled back into equities, though moves on indexes on Friday were muted as investors hunkered down ahead of earnings reports from major U.S. banks including JPMorgan (JPM.N) and Citigroup (C.N) later in the day. 

The pan-European STOXX 600 index inched up 0.1 percent, adding to earlier gains on stock markets in Asia that took MSCI's world stock index .WORLD to an all-time high

World stocks rally, dollar up to two-month high against yen

Stock markets rallied on Monday and the U.S. dollar hit a two-month high against the yen, as robust economic data from the United States and Germany left investors increasingly confident about the strength of the world economy.

Focus also turned to Federal Reserve chief Janet Yellen's semi-annual testimony on monetary policy and a meeting of Canada's central bank on Wednesday for the latest signals on policy from major central banks.

For now, unease about an end to an era of ultra-cheap money has given way to optimism about global growth, with Friday's stronger-than-expected U.S. non-farm payrolls report bolstering risk appetite. Data on Monday showed exports from Germany, Europe's biggest economy, rose more than expected in May.

The pan-European STOXX 600 rallied 0.4 percent, with banks and utilities the strongest sectors. Blue-chip stock markets in London .FTSE, Paris .FCHI and Frankfurt .GDAXI climbed 0.2 to 0.5 percent. [.EU]

They followed gains in Asia, where MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent and Japan's Nikkei .N225 gained 0.8 percent to a one-week high, helped by weakness in the Japanese currency.

MSCI's emerging markets benchmark .MSCIEF posted its best day in two weeks. U.S. stock futures ESc1 1YMc1 were largely flat after strong gains on Wall Street on Friday.

The dollar rose almost 0.4 percent to 114.29 yen JPY=D4, a two-month peak, while the dollar index - which measures the dollar's value against a basket of other major currencies - was a touch firmer at 96.142 .DXY. The euro was softer at $1.1388 EUR=.

Oil prices declined, extending losses at the end of last week on the back of high drilling activity in the United States and ample supplies from OPEC and non-OPEC nations.

Brent crude futures LCOc1, the international benchmark for oil prices, were at $46.27 per barrel, down 50 cents, or around 1 percent, from their last close.

Asia shares drop on Fed minutes, oil edges up after big drop

Most Asian stock markets fell on Thursday after minutes from the Federal Reserve's last meeting showed a lack of consensus on the future pace of U.S. interest rate increases, while oil prices inched higher following a steep decline a day earlier.

European markets were set for a steady open, with financial spreadbetters expecting Britain's FTSE 100 to be unchanged, Germany's DAX to open up 0.2 percent and France's CAC 40 to start the day 0.1 percent higher.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 percent. Japan's Nikkei slipped 0.5 percent as a stronger yen depressed the outlook for export earnings. South Korea's KOSPI and Australian shares both lost 0.1 percent.

China's bluechip CSI 300 index fell 0.5 percent and Hong Kong's Hang Seng slid 0.3 percent.
Trading in Asia has been buffeted this week by tensions on the Korean peninsula after North Korea fired a missile, which U.S. officials concluded was an intercontinental ballistic missile, into Japanese waters.

The United States said on Wednesday it was ready to use force if needed to stop North Korea's nuclear missile programme but said it preferred global diplomatic action against Pyongyang.

The Nasdaq closed up 0.7 percent on Wednesday as technology shares recovered. But the Dow Jones Industrial Average was flat and the S&P 500 gained just 0.15 percent.

Fed policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises, according to minutes released on Wednesday of the central bank's June 13-14 policy meeting.

Several officials also wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August, but others preferred to wait until later in the year.

U.S. 10-year Treasury yields dipped to 2.3232 percent, but remained near a seven-week high touched on Wednesday.

The dollar retreated 0.3 percent to 112.92 yen on Thursday. The dollar index, which tracks the currency against a basket of trade-weighted peers, was little changed at 96.259.