Dollar, oil and stocks look to end year with gains

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - The dollar, oil and U.S. stocks slipped on Friday in thin pre-holiday trading on the last trading day of 2016, but were well on track to notch up sizable gains for the year.

The dollar was on pace for a fourth straight year of gains against a basket of major currencies, while oil prices were headed for their best year since 2009.

Global markets have fared surprisingly well in a year marked by major political shocks, including June's Brexit vote and the unexpected election of Donald Trump as U.S. president in November.

On Friday, MSCI's world index <.MIWD00000PUS>, which tracks shares in 46 countries, was little changed and on pace to finish the year up 5.6 percent.

 

Strength in Asian and European shares helped the index, but weakness on Wall Street weighed.

U.S. stocks slipped following weak economic data and a decline in technology stocks.

After a spate of robust economic reports, the Chicago Purchasing Manager Index fell more than expected to 54.6 in December.

"The market is ending 2016 with a whimper. We entered the rally like a lion, but are leaving as a lamb," said Andre Bakhos, managing director of Janlyn Capital in Bernardsville, New Jersey.

The S&P 500 technology sector <.SPLRCT> fell 0.98 percent, dragged down by weakness in the shares of Microsoft and Facebook .

The Dow Jones Industrial Average <.DJI> was down 32.28 points, or 0.16 percent, to 19,787.5, the S&P 500 <.SPX> lost 7.88 points, or 0.35 percent, to 2,241.38 and the Nasdaq Composite <.IXIC> dropped 46.11 points, or 0.85 percent, to 5,385.98.

Europe's broad FTSEurofirst 300 index <.FTEU3> closed up 0.24 percent at 1,428.4

The dollar index <.DXY>, which measures the greenback against a basket of six major rivals, was set to gain 3.6 percent for the year, even as the euro briefly climbed by about two full cents in overnight trading to $1.0651, its highest since Dec. 14. The index was down 0.43 percent on Friday.

The dollar has rallied hard since the Nov. 8 U.S. presidential election on expectations that President-elect Donald Trump's plan to boost fiscal stimulus would benefit the currency, even as doubts linger about how much dollar appreciation a Trump White House will tolerate.

"Much depends on how the Trump presidency and the Chinese economy work out," said Marshall Gittler, chief market analyst for retail broker FX Primus.

"In general, I expect the dollar to continue to gain."

Oil prices were down for the day, but still on track for their biggest annual gain in seven years after OPEC and other major producers agreed to cut output to reduce a global supply overhang that has depressed prices for two years.

Brent crude was down 0.47 percent at $56.58 a barrel, while U.S. crude was down 0.33 percent at $53.59.

In bond markets, U.S. Treasuries were little changed across the curve in thin pre-holiday trading. Treasuries ended the fourth quarter with their poorest performance in the history of the Merrill Lynch Treasury index, with a -4.175 percent return, through Thursday.

The sell-off during the year's final quarter was due largely to Trump's election victory, analysts said, and the expectation of looser fiscal policy and rising interest rates based on his campaign promises of increased infrastructure spending and tax cuts.

Benchmark 10-year notes > were down 9/32 in price to yield 2.446 percent, little changed from 2.477 percent late on Thursday.

Spot gold prices > were down 0.47 $1,152.83

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Sam Forgione in New York and Yashaswini Swamynathan in Bengaluru)