US stocks close out the worst year for the market since 2008 – Miami Herald

U.S. stocks closed lower on Thursday, capping the worst year for the market since 2008.

The Standard & Poor's 500 index ended essentially flat for the year after the day's modest losses nudged it into the red for 2015. Even factoring in dividends, the index eked out a far smaller return than in 2014.

The Dow Jones industrial average also closed out the year with a loss. The tech-heavy Nasdaq composite fared better, delivering a gain for the year.

"It's a lousy end to a pretty lousy year," said Edward Campbell, portfolio manager for QMA, a unit of Prudential Investment Management. "A very unrewarding year."

Trading was lighter than usual on Thursday ahead of the New Year's Day holiday. Technology stocks were among the biggest decliners, while energy stocks eked out a tiny gain thanks to a rebound in crude oil and natural gas prices.

The Dow ended the day down 178.84 points, or 1 percent, to 17,425.03. The S&P 500 index lost 19.42 points, or 0.9 percent, to 2,043.94. The Nasdaq composite fell 58.43 points, or 1.2 percent, to 5,007.41.

For 2015, the Dow registered a loss of 2.2 percent. It's the first down year for the Dow since 2008. The Nasdaq ended with a gain of 5.7 percent.

The S&P 500 index, regarded as a benchmark for the broader stock market, lost 0.7 percent for the year.

According to preliminary calculations, the index had a total return for the year of just 1.4 percent, including dividends. That's the worst return since 2008 and down sharply from the 13.7 percent it returned in 2014.

While U.S. employers added jobs at a solid pace in 2015 and consumer confidence improved, several factors weighed on stocks in 2015.

Investors worried about flat earnings growth, a deep slump in oil prices and the impact of the stronger dollar on revenues in markets outside the U.S. They also fretted about the timing of the Federal Reserve's first interest rate increase in more than a decade.

The uncertainty led to a volatile year in stocks, which hit new highs earlier in the year, but swooned in August as concerns about a slowdown in China's economy helped drag the three major stock indexes into a correction, or a drop of at least 10 percent. The markets recouped most of their lost ground within a few weeks.

"The market didn't go anywhere and earnings didn't really go anywhere," Campbell said.

On Thursday, nine of the 10 sectors in the S&P 500 index ended lower, led by a 1.4 percent decline in technology stocks. Energy stocks, which had been battered recently as commodities prices sank, rose 0.3 percent as oil prices rebounded. The sector still closed out the year down nearly 24 percent, making it the worst performer in the S&P 500.

Crude oil and natural gas prices recovered some of their losses from the day before. Benchmark U.S. crude climbed 44 cents, or 1.2 percent, to close at $ 37.04 a barrel in New York. Brent crude, used to price international oils, gained 82 cents, or 2.2 percent, to close at $ 37.28 a barrel in London.

In other energy trading in New York, wholesale gasoline rose 3.7 cents to $ 1.267 a gallon, heating oil rose 2.2 cents to $ 1.101 a gallon and natural gas rose 12.3 cents to $ 2.337 per 1,000 cubic feet.

In Europe, Britain's FTSE 100 dropped 0.5 percent, putting it down 4.9 percent for the year. France's CAC-40 fared better in 2015, with an 8.5 percent gain after slipping 0.9 percent on Thursday. Germany's main stock market, which was closed Thursday for the holiday, ended the year with a 9.6 percent gain. In Asia, the Shanghai Composite Index lost 0.9 percent, while Hong Kong's Hang Seng gained 0.1 percent.

Precious and industrial metals prices ended mixed. Gold rose $ 40 cents to $ 1,060.20 an ounce, silver fell 4 cents to $ 13.80 an ounce and copper slid 1 cent to $ 2.14 a pound.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.27 percent from 2.30 percent a day earlier.

In currency markets, the dollar fell to 120.19 yen from 120.55 yen, while the euro fell to $ 1.0859 from $ 1.0924.

Wall Street suffers feeble end to turbulent 2015 – Reuters

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York December 30, 2015.

Reuters/Lucas Jackson

Wall Street dropped on Thursday, leaving the S&P 500 marginally lower for a year marked by record highs as well as a major selloff.

In a reversal of one of 2015’s major trends, oil shares moved higher, with the S&P energy sector up 0.34 percent and alone among gainers.

Much of the blame for this year’s underwhelming stock market performance can be laid at the feet of crude oil prices, which lost a third of their value during an unprecedented global glut. The energy sector fell 24 percent, its worst annual performance since the global recession.

The S&P 500 hit a record high in May only to slump 11 percent over eight days in August over fears of a China-led global economic slowdown. The CBOE Volatility index spiked to a seven-year high before the market recovered.

On the last trading day of 2015, the S&P 500 fell 0.94 percent to 2,043.94 points, leaving it with a total loss of 0.71 percent for the year. The S&P’s total return, including dividends, was about 1.40 percent, according to preliminary data.

“If you went to sleep on Dec. 31, 2014, and woke up today, you’d say what a dull year it’s been, and yet in between we’ve had these wild swings,” said Donald Selkin, chief market strategist at National Securities in New York.

“The lesson is that people should watch the extremes. On those big down days, hold your nose and buy – and don’t be afraid.”

The Dow Jones industrial average lost 2.23 percent for the year, its first annual decline since 2008. The Nasdaq Composite gained 5.73 percent after surpassing levels not seen since the dot-com bubble in 2000.

Eight of the 10 worst performers on the S&P this year were energy companies, led by Chesapeake Energy’s 77-percent slump.

The consumer discretionary sector, on the other hand, was the S&P’s best performer, rising 8.43 percent thanks to Netflix’s 134-percent increase and Amazon’s 118-percent surge.

Consumer stocks also took the top three spots on the Dow, led by Nike’s 30-percent increase in 2015.

GOOD RIDDANCE!

With much of the day’s losses suffered in the last few minutes of trade, the Dow Jones industrial average fell 1.02 percent to end at 17,425.03. The Nasdaq Composite lost 1.15 percent to 5,007.41.

Nine of the 10 major S&P sectors fell Thursday, led by a 1.43-percent fall in the technology sector.

Many of the risks that worried investors this year will remain front and center in 2016.

“Elevated valuations, modest earnings growth and muted economic activity. Of course, there is the additional variable of rising interest rates,” said David Joy, chief market strategist at Ameriprise Financial in Boston.

Apple dropped 1.92 percent and was the biggest drag on all three indexes. Its stock has been pressured by concerns about potentially weak iPhone sales and ended the year down 4.5 percent, its first annual loss since 2008.

“Apple is caught between being a growth stock and being a value stock and it’s caught in the abyss,” said John Augustine, chief investment officer at Huntington Wealth & Investment Management.

Investors next week will watch for a potential “January effect,” when stocks that were sold in December for year-end tax purposes bounce back.

Volume on U.S. exchanges was 5.3 billion shares, below the 7.2 billion average over the last 20 trading days, according to Thomson Reuters data.

Advancing issues outnumbered decliners on the NYSE by 1,882 to 1,163. On the Nasdaq, 1,869 issues fell and 1,022 advanced.

The S&P 500 index showed one new 52-week highs and two new lows, while the Nasdaq recorded 32 new highs and 72 new lows.

(Additional reporting by David Gaffen in New York and Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski and David Gregorio)

S&P 500 slips back into the red for the year – Reuters

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York December 30, 2015.

Reuters/Lucas Jackson

Wall Street slipped lower in thin trading on Thursday, with the S&P 500 heading for an almost flat ending to a volatile year of record highs and steep drops.

All three major U.S. stock indexes hit record highs this year but have since climbed down after crude’s steep loss sent energy stocks tumbling.

The Dow Jones industrial average was down about 1.4 percent for the year but the Nasdaq Composite was up 6.7 percent.

“As we close out of the year, it’s been a tale of two tapes, with narrow leadership holding up the major indices, while the vast majority of the market continues to underperform,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“The big story today as investors wrap up the year is that after all that’s said and done, it’s a flat year for the S&P 500,” Sarhan said.

The rout in commodities has sent markets across the world reeling as oil prices floundered under an unprecedented global glut that may take another year to clear. [O/R]

The S&P energy sector .SPNY lost nearly 24 percent in 2015, followed by a near 10 percent loss in materials .SPLRCM.

Eight of the 10 worst performers on the S&P this year are energy companies, led by Chesapeake Energy’s (CHK.N) 78 percent decline.

The consumer discretionary sector .SPLRCD, on the other hand, has been the best performer on the S&P, rising 9.4 percent, led by Netflix’s (NFLX.O) 140 percent increase and Amazon’s (AMZN.O) 121 percent gain.

Consumer stocks also took the top three spots on the Dow, led by Nike’s (NKE.N) 31 percent increase.

At 12:28 p.m. ET on Thursday, the Dow .DJI was down 26.67 points, or 0.15 percent, at 17,577.2, the S&P 500 .SPX was down 3.17 points, or 0.15 percent, at 2,060.19 and the Nasdaq Composite .IXIC was down 14.29 points, or 0.28 percent, at 5,051.56.

Six of the 10 major S&P sectors were lower, led by the 1.07 percent fall in the utilities sector .SPLRCU.

Apple (AAPL.O) was down 1.4 percent at $ 105.81 and was the biggest drag on all three indexes.

Advancing issues outnumbered decliners on the NYSE by 1,504 to 1,441. On the Nasdaq, 1,534 issues fell and 1,248 advanced.

The S&P 500 index showed no new 52-week highs and two new lows, while the Nasdaq recorded 22 new highs and 53 new lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)

Jobless Claims in U.S. Increase to Highest Level Since July – Bloomberg

The number of Americans filing applications for unemployment benefits rose more than projected during the Christmas week, reaching the highest level in almost six months, perhaps reflecting typical swings during holidays.

Jobless claims jumped by 20,000 to 287,000 in the week ended Dec. 26, a report from the Labor Department showed on Thursday in Washington. The median forecast of 30 economists surveyed by Bloomberg called for 270,000. Applications haven't been this high since the week ended July 4, the American Independence Day holiday.

While there was nothing unusual in the state-level data, the jump could have been caused by the volatility introduced when the numbers are adjusted for seasonal variations, a Labor Department spokesman said as the figures were released to the press. Limited firings, steady hiring and an unemployment rate at more than a seven-year low underscore job market improvement that allowed the Federal Reserve to lift interest rates this month for the first time since 2006.

"We do have to discount the heightened volatility we have around this time of the year," said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, who correctly projected the jump. "When the dust settles, we'll see claims drop back down. There will be continued slow improvement in the labor market."

Holiday Swings

No states estimated data last week, according to the Labor Department. Before adjusting for seasonal variations, the increase in claims last week was about typical for this time of year, the agency spokesman said. The seasonal adjustment, however, wasn't anticipating the increase, the spokesman added.

Economists' estimates in the Bloomberg survey for weekly jobless claims ranged from 259,000 to 287,000. The previous week's figure was unrevised at 267,000.

The four-week moving average, a less volatile measure than the weekly claims numbers, increased to 277,000 last week from 272,500.

The number of people continuing to receive jobless benefits rose by 3,000 to 2.2 million in the week ended Dec. 19. The unemployment rate among people eligible for benefits held at 1.6 percent. These data are reported with a one-week lag.

Claims, Payrolls

Initial jobless claims reflect weekly firings, and a sustained low level of applications has typically coincided with faster job gains. Many layoffs may also reflect company- or industry-specific causes, such as cost-cutting or business restructuring, rather than underlying labor market trends.

Since early March, claims have been below the 300,000 level that economists say is typically consistent with an improving job market.

Data released earlier this month showed the economy added 211,000 workers in November, and the unemployment rate held at 5 percent, more than a seven year low.

Citing improvement in the economy and the labor market, Fed policy makers on Dec. 16 set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent.

(Updates with economist comment in fourth paragraph.)

Riskiest Bank Debt Pays Off as Safety Net Erected Under Lenders – Bloomberg

Regulators' efforts to make banks safer are paying off for investors who prefer to live a little dangerously.

Buyers of bank debt that would be written off first in a crisis have earned an average of 8.2 percent this year, according to Bank of America Merrill Lynch's contingent-capital index. The notes were the best-performing credit assets globally, according to Royal Bank of Scotland Group Plc.

Tighter rules forcing banks to hold more capital and curb speculative activities have boosted confidence in even the riskiest of lenders' bonds, known as additional Tier 1 securities. At the same time, quantitative easing in Europe has suppressed yields, luring investors to higher-yielding debt.

"Regulators have crafted the perfect environment for bank credit investors," said Lloyd Harris, a London-based portfolio manager at Old Mutual Global Investors, which manages 22 billion pounds ($ 33 billion) of assets. "Money and lending is being kept on a tight leash."

AT1s are gaining as banks strengthen their balance sheets before new capital rules start in 2019. Lenders are selling assets and raising funds, reducing the risk they'll fail. Standard Chartered Plc, for example, increased its equity cushion by raising about $ 5.1 billion.

Lenders worldwide are also curtailing riskier businesses as the new rules, introduced in response to the global financial crisis, make them less lucrative. Royal Bank of Scotland Group Plc sold U.S. consumer bank Citizens Financial Group Inc. and Morgan Stanley is among banks cutting fixed-income divisions.

Capital Rules

The popularity of AT1 notes, which convert into equity or are written off if a lender's losses mount, has also climbed amid a slowdown in new issuance.

"The direction of travel is firmly toward better capitalized banks," said Jakub Lichwa, a credit analyst at Daiwa Capital Markets in London.

The cost of insuring debt sold by financial companies in Europe dropped below that for investment-grade companies, according to credit-derivatives indexes. The relationship was mostly reversed since the financial crisis.

Total returns on AT1 securities include coupon payments that are typically about 6 percent to 8 percent a year, helping to cushion against losses. The rewards investors are reaping from the securities compare with moderate returns or losses on other debt.

While senior bank bonds in Europe and the U.S. have generated small profits this year, investment-grade corporate bonds in euros lost an average of 0.5 percent, the first loss since 2008, and similarly rated U.S. bonds declined. Lower liquidity is curbing the appeal of bonds that were once seen as havens, according to JPMorgan Chase & Co.

High-yield bonds in the U.S. lost an average 4.7 percent, the first drop in seven years, according to Bank of America Merrill Lynch, as a slump in oil prices makes it difficult for energy companies to service their debt.

"Bonds can be bailed in if a bank runs into trouble, but the likelihood of that has really diminished," Harris said.

Puerto Rico Says It Will Default on Some Bonds – New York Times

Photo

Alejandro Garcia Padilla, governor of Puerto Rico, in Washington this month. He said Wednesday that two groups of Puerto Rico’s bondholders would be denied interest payments due to them Jan. 1. Credit Sait Serkan Gurbuz/Associated Press

Puerto Rico will default on nearly $ 174 million in principal and interest payments on bonds on Friday, the first day of 2016, the governor said on Wednesday, increasing the likelihood that the island will face lawsuits from an array of creditors.

In a briefing for journalists, Gov. Alejandro García Padilla said only some of the payments would be halted immediately. They include $ 35.9 million due to holders of bonds issued by its Infrastructure Financing Authority, and $ 1.4 million due to holders of its Public Finance Corporation's bonds.

In a stark example of the financial version of musical chairs that has been playing out on the island in recent months, the government will divert a total of $ 174 million from lower-grade bonds to pay holders of the legally protected general obligation bonds. That diversion, known as a "clawback," technically amounts to a default even though some of those creditors will not see a difference in their payments on Jan. 1.

General obligation bonds have a top priority under Puerto Rico's Constitution, and defaulting on them outside an official bankruptcy proceeding could set off a constitutional crisis, making the island's problems even worse than they already are.

As a result of the shuffle, the general obligation bondholders will receive on Friday the entire $ 328.7 million they are owed, said the governor, who referred to those top-ranked bondholders as participants in "vulture funds."

At a news conference later in the day in San Juan, the island's capital, he accused the general obligation bondholders — who have resisted efforts to cut back their payments — of caring more about their financial interests than the well-being of Puerto Rico's residents.

"We know that our creditors have spent a fortune lobbying against the people of Puerto Rico," Mr. García Padilla said, according to an unofficial English transcript of the event, which was conducted in Spanish. The bondholders, he said, were "willing and anxious to initiate costly and disruptive litigation against the commonwealth, and attempt to attach and seize the little cash left in our accounts to obstruct our ability to provide essential services to our people."

"My administration has the obligation to protect the people of Puerto Rico against the grave consequences of a disruption in essential services and a government shutdown, which would result from a wider default," he added.

Melba Acosta Febo, the head of Puerto Rico's Government Development Bank, told journalists that the clawback of certain bond money was legal in Puerto Rico. She said that the possibility of such a step had been disclosed in the marketing materials for the affected bonds.

The development bank, which orchestrates most of Puerto Rico's debt, issued a statement on Wednesday, saying that it intended to make separate principal and interest payments of about $ 10 million due on Friday.

In his briefing, the governor said that some of the investors whose bonds are part of the clawback would still receive the full amounts they expected on Friday. That is because Puerto Rico had previously sent enough money to bond trustees to cover the most imminent payments. Once money has been sent to a trustee, it cannot be clawed back.

Even though the bondholders in this group will not feel any immediate difference, their bonds will still be considered in default, Mr. García Padilla said, because their prepaid reserves are now being depleted and the flow of additional funds to the trustees has ceased. That means the number of bondholders who are left unpaid is likely to grow, as more payments are due in the coming months.

Investors in this group include those who hold bonds issued by the Puerto Rico Highways and Transportation Authority, and its Convention Center District Authority.

In a hint at the extremely complex structure of Puerto Rico's total debt, the governor pointed out that not all of the Infrastructure Financing Authority bonds would be in default on Jan. 1 because, much like the general obligation bonds, some of them also carry a governmental guarantee.

In effect, one group of Infrastructure Authority investors — those without the guarantee — are having their money clawed back to pay another group of Infrastructure Authority investors whose bonds are guaranteed. This is something few ordinary investors are likely to have understood when they first decided to invest in Puerto Rico's bonds.

The bonds are widely held across the United States mainland, because they offer better-than-usual tax preferences and a higher yield than most municipal bonds. In the past, Puerto Rican debt was a popular addition to mutual fund portfolios because it increased the overall yield.

When asked how he expected the rising tide of defaults to affect the broad restructuring talks that Puerto Rico has been calling for, Mr. García Padilla said he thought it would make them harder. Some investors will now be forced to make unexpected sacrifices that help other investors, a situation that the governor said could not be good for anyone in the long run.

Mr. García Padilla said that he had been forced to claw back money from the lower-ranked bondholders because the island had practically run out of cash and Congress had so far failed to respond to its pleas for help. He said he needed to save at least some money to keep paying nurses in hospitals, police officers and teachers.

At least two types of Puerto Rican bonds remained outside the line of fire, the governor said. One is a type of bond backed by dedicated sales taxes through the Puerto Rico Sales Tax Financing Corporation, known by its Spanish acronym, Cofina. The other is a type of bond issued by the Puerto Rico Electric Power Authority, or Prepa.

For months, Puerto Rican officials have been urging Congress to amend the federal bankruptcy code to eliminate an exclusion that currently bars any branch of the Puerto Rican government from restructuring in Chapter 9 municipal bankruptcy.

The Republican senators who chair the relevant committees have expressed concern for the island's predicament but have said so far that they could not consider such an amendment until more was known about why Puerto Rico had fallen into such distress and what could be done to address the systemic causes. Legislative efforts were expected to resume when Congress returns in January.

The Treasury said in a statement on Wednesday that Puerto Rico's default "demonstrates the gravity of the commonwealth's fiscal crisis and the need for Congress to act now."

The statement continued: "Puerto Rico is at a dead end, shifting funds from one creditor to pay another and diverting money from already-depleted pension funds to pay both current bills and debt service. This increasingly urgent situation demands swift congressional action to give Puerto Rico access to an orderly restructuring regime paired with independent oversight."

Puerto Rico avoids loan default by dipping into cash reserves – Washington Post

Puerto Rico will skirt a catastrophic default on the vast majority of more than $ 1 billion in bond payments due in early January, an outcome that required island officialsto raidcash set aside to pay other debts.

The financial maneuvers will allow the cash-strapped territory to escape default on all but $ 37.3 million owed to creditors, a relatively small default that marks the second time since August that it will have missed a bond payment.

The moves allow Puerto Rico to buy time as officials hope Congress will help restructure its staggering debt burden. But with the island suffering from a decade-long recession that has shrunk tax revenues and ignited a large migration to the mainland, officials said major defaults loom in May unless lawmakers give the territory an orderly process for restructuring its debt.

"The use of over $ 100 million in reserved funds to make debt service payments for several of the Commonwealth's issuers should underscore that the Commonwealth is running out of options to pay its debt," Melba Acosta Febo, president of Puerto Rico's Government Development Bank, said in a statement.

As a territory, Puerto Rico lacks the option of bankruptcy that has been used successfully in the past in cities and counties grappling with suffocating debt, including Detroit, Vallejo, Calif., and Jefferson County, Alabama.

The Treasury Department has joined with Puerto Rican officials to press members of Congress to pass legislation enabling the commonwealth to seek Chapter 9 protection from creditors or create a financial control board that would have enough authority to coerce recalcitrant bondholders to join a restructuring plan.

"Today's announcement that Puerto Rico will miss additional payments demonstrates the gravity of the Commonwealth's fiscal crisis and the need for Congress to act now," a Treasury spokesman said in a statement Wednesday. "Puerto Rico is at a dead end, shifting funds from one creditor to pay another and diverting money from already-depleted pension funds to pay both current bills and debt service."

Congressional Republicans generally have opposed granting a bankruptcy option to Puerto Rico, which some members liken to a bailout even though it would not cost any taxpayer money. Others want Puerto Rico — which has slashed public pensions, cut jobs, and withheld income tax refunds to stay afloat financially — to do more to trim spending and free money to pay creditors.

Still, House Speaker Paul D. Ryan (R-Wis.) has said that the House would work to craft a legislative package by the end of March to deal with Puerto Rico's financial problems — a pledge that has left some Puerto Rican leaders cold.

"These payments are due now," Puerto Rico Gov. Alejandro Garcia Padilla said in a speech Wednesday.

In late June, Garcia Padilla called the territory's more than $ 70 billion debt "unpayable." The debt had mounted over the years as a succession of leaders relied on loans to plug increasing budget shortfalls. The cycle of deficits and borrowing was enabled by the fact that Puerto Rican bonds were long seen an attractive because money that investors earned on them is shielded from federal, state and local taxes.

The island's economy has been in free fall since 2006 when a lucrative tax break that lured manufacturers was fully phased out. Now, just 40 percent of adults in Puerto Rico are in the labor force, and unemployment has been in double digits for the past 15 years. The bleak economy has caused the largest migration of Puerto Ricans to the mainland since the 1950s.

Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.

Puerto Rico to Default on $37 Million of Payments Due Jan. 1 – Bloomberg

Puerto Rico will default on about $ 37 million in bond payments due Jan. 1 and divert revenue to make others, escalating a conflict with investors as Governor Alejandro Garcia Padilla seeks to restructure a $ 70 billion debt burden.

The amount is a fraction of the almost $ 1 billion in interest due at the start of the year. The island will miss payments on $ 35.9 million of non-commonwealth guaranteed Puerto Rico Infrastructure Financing Authority debt and $ 1.4 million of Public Finance Corp. bonds. The money is being used to help pay investors who are owned $ 328.7 million of interest on general-obligation debt.

Garcia Padilla has warned for weeks that if forced to choose between paying creditors and paying for essential services, he would favor his people. A skipped general-obligation payment would have marked a turning point in Puerto Rico's debt crisis because the securities are considered to have the strongest legal protections among the island's different issuers. The commonwealth's constitution states that general-obligation bonds must be repaid before other expenses.

"My government has the responsibility to protect, as much as possible, Puerto Ricans from grave consequences,” Garcia Padilla said in a press conference in San Juan. "In recent months we have put up a tough fight in Congress, looking for the tools we need. We all know that the creditors have spent a fortune lobbying against Puerto Ricans in Congress."

Revenue Clawback

Garcia Padilla this month started redirecting revenue used to repay certain agency debt to the central government's coffers. About half of funds to make the general-obligation bond payment — $ 164 million — is coming from the clawback. By keeping the commonwealth's pledge to those investors, he hopes to continue negotiating with bondholders as Congress works on a plan for the island, he said.

Agencies such as the Highways & Transportation Authority and the Convention Center District Authority had said they'll use reserves to help pay their investors on Jan. 1. Holders of bonds issued by the Government Development Bank, the Public Buildings Authority, the Employees Retirement System, the Industrial Development Company and the University of Puerto Rico will also receive payments due in January.

The Infrastructure Financing Authority, while defaulting on some debt, will make payments that are guaranteed by the commonwealth. Holders of sales-tax revenue debt will also receive their payments– and for the future. Puerto Rico doesn't have plans to clawback sales-tax collections because the government doesn't have control over that revenue, Melba Acosta, president of the GDB, said Wednesday during a call with reporters.

Initial Default

Only one Puerto Rico entity has already skipped debt payments. The Public Finance Corp., which borrowed to help cover the government's budget deficits, in August failed to pay principal and interest because lawmakers didn't appropriate the funds. Its bonds due in 2031 trade for about six cents on the dollar. Because they're backed by a weaker legal pledge than other securities, there have been few repercussions.

Garcia Padilla in late June said the commonwealth was unable to repay all of its obligations on time and in full. Puerto Rico's economy shrank 15 percent in the past decade after federal tax breaks for U.S. manufacturers ended in 2006, taking away incentives for pharmaceutical companies and other businesses to remain on the island. Residents also left to find work on the U.S. mainland, resulting in a 9.2 percent population drop since 2004, according to U.S. Census data.

Congressional Action

The default follows Garcia Padilla's failed attempt to persuade Congress in December to include a provision in a $ 1.1 trillion spending bill to allow commonwealth agencies to file for bankruptcy protection. House Speaker Paul Ryan directed committee heads to come up with a plan for Puerto Rico by the end of March. Congressional Democrats on Dec. 21 filed bills that would shield Puerto Rico from any lawsuits until then.

The $ 3.7 trillion municipal-bond market has been anticipating a default on commonwealth debt because Puerto Rico securities have been trading at distressed levels for two years. Commonwealth debt has lost 8.1 percent this year through Dec. 29, compared with a 3.3 percent gain in the broader muni market, according to S&P Dow Jones Indices.

Puerto Rico general-obligation bonds with an 8 percent coupon and maturing 2035 gained after the governor said the payments will be made. The debt traded at an average price of 73 cents on the dollar, up from 71.5 cents Tuesday, data compiled by Bloomberg show. The average yield was 11.5 percent.

Global growth will be disappointing in 2016: IMF’s Lagarde – Reuters

Managing Director of the International Monetary Fund Christine Lagarde speaks at a press conference at the Treasury in London, which was attended by Britain’s Chancellor of the Exchequer George Osborne, December 11, 2015.

Reuters/Stefan Rousseau/Pool

Global economic growth will be disappointing next year and the outlook for the medium-term has also deteriorated, the head of the International Monetary Fund said in a guest article for German newspaper Handelsblatt published on Wednesday.

IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.

Added to that, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, she said.

“All of that means global growth will be disappointing and uneven in 2016,” Lagarde said, noting that mid-term prospects had also weakened as low productivity, ageing populations and the effects of the global financial crisis dampened growth.

In October the IMF forecast that the world economy would grow by 3.6 percent in 2016.

Lagarde said the start of a normalization of U.S. monetary policy and China’s shift toward consumption-led growth were “necessary and healthy” changes but needed to be carried out as efficiently and smoothly as possible.

The U.S. Federal Reserve hiked interest rates for the first time in nearly a decade this month and made clear that was a tentative beginning to a “gradual” tightening cycle.

There are “potential spillover effects”, with the prospect of increasing interest rates there already having contributed to higher financing costs for some borrowers, including in emerging and developing markets, Lagarde said.

While countries other than highly developed economies were generally better prepared for higher interest rates than previously, she was concerned about their ability to absorb shocks, she said.

Emerging market companies with debt in dollars and revenue in sinking local currencies could struggle as the Fed begins what is expected to be a series of interest rate increases.

Lagarde warned that rising U.S. interest rates and a stronger dollar could lead to companies defaulting on their payments and that this could “infect” banks and states.

But she said the risks associated with these changes could be overcome by supporting demand, maintaining financial stability and reforming structures.

“Most highly developed economies except the USA and possibly Britain will continue to need loose monetary policy but all countries in this category should comprehensively factor spillover effects into their decision-making,” Lagarde said.

She said emerging markets needed to improve monitoring of the foreign exchange risks their big companies face.

Lagarde also said countries which export raw materials and had scope for fiscal policy measures should use that so they can adjust more smoothly to lower prices. Others should focus on restructuring their budgets in a growth-friendly way such as through tax and energy price reforms and changing their spending priorities, she said.

(Editing by Louise Ireland)

Asian stocks erase gains as crude oil rebound fizzles – Reuters

A man, holding a mobile phone, walks past an electronic stock quotation board outside a brokerage in Tokyo, Japan, December 1, 2015.

Reuters/Toru Hanai

Asian shares unwound early gains on Wednesday, as weakness in Chinese stocks continued and investors turned cautious following renewed selling in recently battered crude oil futures.

Financial spreadbetters predicted a lackluster start to European trading, with IG expecting Britain’s FTSE 100 .FTSE to open down 0.2 percent. Germany’s DAX .GDAXI and France’s CAC .FCHI were expected to shed a few points and open flat in percentage terms.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS erased a positive start to edge down 0.1 percent, on track for a flat monthly performance and down 12 percent for the year.

On Wall Street, major U.S. indexes each gained more than 1 percent. All 10 major S&P sectors ended with gains, led by a 1.34 percent rise in the technology sector .SPLRCT, which lifted the S&P 500 .SPX to a modest increase for the year.

Japan’s Nikkei .N225 ended the country’s final trading day of the year up 0.3 percent, off session highs but still gaining 9.1 percent for 2015. But it shed 3.6 percent in December.

The broader Topix .TOPX rose 0.3 percent in thin trade, with only 1.32 billion shares changing hands, the lowest since April 2014.

“We’re seeing thin volumes at year-end as the number of active participants has decreased due to the holidays,” said Martin King, co-managing director at Tyton Capital Advisors.

Australian shares outperformed, rising 1 percent to mark their ninth consecutive day of gains.

But China’s blue-chip CSI300 index .CSI300 was down 0.2 percent, while the Shanghai Composite Index .SSEC was flat, ahead of December manufacturing activity surveys which are expected to show the economy remains sluggish.

Qi Yifeng, an analyst at consultancy CEBM, said Chinese investors mostly worried about the economy, and a potential equity glut.

“Next year, there will definitely be a surge in share supply,” Qi said, citing the expiration of the share-sale ban and reforms that would make new listings much easier.

Also damping investor sentiment, a Reuters poll showed that activity in China’s manufacturing sector is expected to have contracted for a fifth straight month in December. The official data will be released on Friday, and a similar private survey on Monday.

Higher U.S. Treasury yields underpinned the dollar overnight, although yields were off highs in Asia.

The yield on benchmark 10-year U.S. Treasury notes US10YT=RR stood at 2.292 percent, compared with its U.S. close of 2.307 percent on Tuesday.

On the U.S. two-year note US2YT=RR, the yield closed at 1.095 percent on Tuesday after earlier touching its highest level since April 2010.

The dollar index .DXY, which tracks the greenback against a basket of six rival currencies, was up about 0.1 percent at 98.176.

After touching a nearly two-week low earlier in the session, the index rose to nearly a one-week high of 98.413 on Tuesday. It is up 8.8 percent for the year, though down nearly 2 percent for the month as investors pared their dollar-long positions after the U.S. Federal Reserve’s widely anticipated interest rate increase in mid-December.

The dollar was steady at 120.40 yen JPY=, while the euro edged up 0.1 percent to $ 1.0930 EUR=.

The Australian dollar, meanwhile, slipped about 0.1 percent to $ 0.7286 AUD=D4 as the renewed selling in crude prices prompted investors to lock it gains on its rise to $ 0.7303 overnight, its highest since Dec. 10.

The New Zealand dollar was down 0.3 percent at $ 0.6848 NZD=D4, after it scaled a 10-week peak of $ 0.6881 in the previous session.

In commodities trading, U.S. crude futures CLc1 skidded 1.7 percent to $ 37.23 a barrel, while Brent LCOc1 shed 0.9 percent to $ 37.46. Both had jumped 3 percent overnight, taking back ground lost in the previous session as colder U.S. weather forecasts raised expectations of more demand.

But weekly data from industry group the American Petroleum Institute (API) showed a rise of almost 3 million barrels in U.S. crude inventories, defying expectations of no change and rekindling fears of a supply glut.

Spot gold XAU= edged up about 0.2 percent to $ 1,069.96 an ounce, but remained poised to drop 9.6 percent for 2015 to log its third year of losses.

(Additional reporting by Joshua Hunt in Tokyo, and Samuel Shen and Nathaniel Taplin in Shanghai; Editing by Richard Pullin and Richard Borsuk)

Seattle area home-price gains keep accelerating – The Seattle Times

Seattle area home prices continued their march upward in October.

The average price of existing single-family homes in King, Snohomish and Pierce counties rose 1.3 percent from the previous month, after taking seasonal fluctuations into account. In September the average price gain was 0.9 percent.

Over the year, the Seattle area posted an 8.8 percent gain, compared with an 8.2 percent increase in September, according to S&P Dow Jones Indices, publisher of the Case-Shiller index.

Nationally, October home prices increased over the month in all 20 metropolitan areas surveyed, with the overall index rising by 0.8 percent after adjustment for seasonal fluctuations. Average prices rose 5.5 percent annually.

David Blitzer, who oversees the index at S&P Dow Jones Indices, said in a statement that economic conditions supported the climb in home prices nationally. Inventories of existing homes are fairly tight, while sales of new homes remain mixed.

The Federal Reserve's recent decision to raise the interest rate that banks pay shouldn't lead to "runaway mortgage-interest rates," Blitzer said.

San Francisco, Denver and Portland had the highest price hikes over the year, with another month of double-digit price increases of 10.9 percent for all three.

The Chicago metro area posted the weakest increase in average home prices at 1.3 percent.

The Seattle area, which is experiencing its worst shortage of homes for sale in over a decade, has seen home prices accelerate since January, when the average price was 6.8 percent higher over the year. October's 8.8 percent annual gain was the highest yet this year.

Home prices in the Seattle area are just 3.4 percent below the last peak set in the summer of 2007, according to the Case-Shiller index. Nationally, average prices are still 12.3 percent off their 2006 peak.

Lower-priced homes got hammered during the recession and took longer to rebound than higher-priced homes. In the first half of 2015, these lower-priced homes appreciated 10 to 11 percent over the year, compared with 6 to 8 percent for higher-priced homes. In October, annual price gains for lower- and upper-priced homes in the Seattle area were about 9 percent.

The Case-Shiller index is based on existing single-family-home sales and tracks the average change in the price of a home between the current sale and the previous sale.

Meanwhile, Zillow said the median value in October of Seattle area single-family homes was $ 380,200, up 8.6 percent over the year.

Seattle-based Zillow's home-price index is based on the estimated value of all properties in a market, not just those that sold in a given month.

While the pace of the Seattle area's price gains is well above the historical average, only six out of 66 experts in a survey sponsored by Zillow believe the market is already in a bubble. Two more experts believe there's significant bubble risk in the next year, while 13 experts say there's significant risk in three to five years.

Zillow Chief Economist Svenja Gudell said the market is far healthier now than a decade ago, when loose lending and speculation inflated the housing bubble.

"I don't think we're in a housing bubble in any market," Gudell said in an interview earlier this month. Solid demand and a tight housing supply are what's driving prices higher, she said.

While institutional investors are part of the demand, they're less active now: In October, 2.7 percent of home sales in the Seattle area were to institutional investors, compared with 4.3 percent a year ago and a peak of 7.7 percent in March 2013, according to RealtyTrac. (The California-based data provider defines institutional investors as buyers purchasing at least 10 residential properties in a calendar year.)

But cash buyers — including ones from overseas — still represent a major threat to first-time buyers. In October, 20.6 percent of Seattle area home sales were cash sales, RealtyTrac reports, down from 23.4 percent a year ago and a peak of 31.6 percent in February 2011.

Combine that with rising interest rates and home prices and some prospective first-time buyers may have to rent longer.

"The median age of first-time homebuyers will reach new highs next year as more millennials delay key life decisions and stay in rental housing longer," Zillow's Gudell said in a statement. "This is likely to help rents keep rising, though at a slower pace than we've seen, which will contribute to worsening rental affordability."

Sidecar Squeezed Out by Uber and Lyft, Will Shut Down on Dec. 31 – Bloomberg

Sidecar Technologies Inc., the third-biggest U.S. car-hailing service, said it will end its ride and delivery operations as the company is squeezed out by better-known competitors Uber Technologies Inc. and Lyft Inc.

One of the pioneers of the ride-sharing concept, Sidecar will end its service on Dec. 31, co-founders Sunil Paul and Jahan Khanna wrote in a blog post. The move will help pave the way for the “next big adventure in 2016,” according to the letter.

“Shutting down the Sidecar service is a disappointment for our team and our fans,” Paul and Khanna said in the letter. “The impact of our work, however, will be felt for generations to come.”

Founded four years ago, Sidecar created one of the first apps to try ride-destination tracking, discounted carpooling and deliveries that placed people and packages on the same route, according to its founders. The closely held San Francisco-based company shifted from transporting passengers to goods after struggling to compete with Uber and Lyft, according to CB Insights.

“They're competing with very heavily funded companies, and they didn't have the same pull with drivers that these other companies might have,” said Nikhil Krishnan, a technology analyst at CB Insights. “Even when it pivoted to transporting goods, it still had to compete with Postmates, and even Uber is transporting goods.”

Sidecar has raised about $ 35 million, according to Margaret Ryan, a company spokeswoman. That number pales in comparison to venture capital raised by Uber and Lyft. Bloomberg News reported earlier this month that Uber is seeking $ 2.1 billion in a financing round that would value the car-booking company at $ 62.5 billion. Lyft, the No. 2 ride-hailing service, is currently seeking to raise $ 500 million, according to fundraising documents obtained by Bloomberg last month. Sidecar's investors include Union Square Ventures, Google Ventures, and Richard Branson.

Home Prices and Consumer Confidence Show Strength, Reports Say – New York Times

Photo

Homes in the Haight-Ashbury neighborhood of San Francisco. Home values in the United States have climbed at a roughly 5 percent pace during much of 2015. Credit Robert Galbraith/Reuters

Steady job growth, low mortgage rates and tight inventories helped spur rising home prices in October, and a stronger job market lifted consumer confidence in December, separate reports showed on Tuesday.

The Standard & Poor's/Case-Shiller 20-city home price index rose 5.5 percent in the 12 months ending in October, up from a 5.4 percent pace in September.

Home values have climbed at a roughly 5 percent pace during much of 2015, as strong hiring has bolstered a real estate market still recovering from a housing crash that led to a recession eight years ago.

"The U.S. housing market as a whole made great progress in 2015, as the big and occasionally volatile bounce off the bottom we experienced from 2012 through 2014 gave way to a more stable and sustainable environment," said Svenja Gudell, chief economist at the real estate firm Zillow.

Rising demand, however, has not been met with an increase in sales listings, causing prices to rise much faster than inflation or wages this year. This could limit the number of first-time buyers coming into the market next year. Still, many buyers are also benefiting from 30-year, fixed-rate mortgages averaging less than 4 percent, making it cheaper to borrow for a home. Mortgage rates have historically been closer to 6 percent.

But the gains in home prices have been uneven. San Francisco, Denver and Portland, Ore., led with reported increases of 10.9 percent over the last year. Prices in Chicago and Washington, D.C., rose less than 2 percent. The 20-city index remains 11.5 percent below its peak in July 2006, with metro areas such as Cleveland, Detroit, Miami, Minneapolis and Tampa still significantly below their pre-recession highs.

The Case-Shiller index covers roughly half of the homes in the United States. The index measures prices compared with those in January 2000 and creates a three-month moving average.

In another report, the Conference Board's consumer confidence index rose to 96.5 this month from November's revised 92.6.

Americans were more optimistic about current conditions and about the future.

"As 2015 draws to a close, consumers' assessment of the current state of the economy remains positive, particularly their assessment of the job market," said Lynn Franco, the group's director of economic indicators.

More than two-thirds of consumers said they expected interest rates to rise over the next year, the highest share since August 2013. On Dec. 16, the Federal Reserve raised the short-term interest rate it controls for the first time since 2006.

Hiring has been healthy in 2015. Employers added an average of 210,000 jobs a month through November. Unemployment has stayed at a seven-year low of 5 percent for two straight months. Confidence had dipped unexpectedly in November and this month remained below readings around 100 from August through October.

"U.S. consumers regained a bit of their swagger in December," Jennifer Lee, a senior economist at BMO Capital Markets, wrote in a research report. She noted that confidence rebounded the most among young households — those headed by someone younger than 35 — potentially a sign that more first-time home buyers were ready to enter the housing market.

Home Prices in 20 U.S. Cities Rose at a Faster Pace in October – Bloomberg

Home values in 20 U.S. cities rose at a faster pace in the year ended October as lean inventories of available properties combined with steadily improving demand.

The S&P/Case-Shiller index of property values climbed 5.5 percent from October 2014 after rising 5.4 percent in the year ended September, the group said Tuesday in New York. The median projection of 21 economists surveyed by Bloomberg called for a 5.6 percent advance. Nationally, prices rose 5.2 percent year-over-year.

A limited supply of properties for sale has helped prop up home values, boosting the household wealth levels of U.S. homeowners in the process. Faster wage growth and continued low borrowing costs will be needed to keep low-income and first-time buyers in the market and provide the next leg of growth in the housing recovery.

Job gains and more household formation "will continue to boost demand, and prices should continue to stay within this current healthy range in 2016," Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. And even after the Federal Reserve's first interest-rate increase in almost a decade, "it's still going to be an environment where overall mortgage rates will remain low."

"We're not at a scary point in any way — prices are creeping up, but tight supply is definitely keeping them a little more elevated than one would hope," Sophia Kearney-Lederman, an economic analyst at FTN Financial at New York, said before the report. "There are certain hot-spot areas, particularly on the coasts and out west."

Survey Results

Economists' estimates in the Bloomberg survey for the 20-city gauge ranged from gains of 5.1 percent to 6.3 percent. The S&P/Case-Shiller index is based on a three-month average, which means the October figure was also influenced by transactions in September and August.

All 20 cities in the index showed a year-over-year increase, led by gains of 10.9 percent in San Francisco, Denver and Portland, Oregon. Twelve cities saw year-to-year prices climb at a faster rate than in September. Chicago showed the smallest increase, at 1.3 percent.

The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.

"Generally good economic conditions continue to support gains in home prices," David Blitzer, chairman of the S&P index committee, said in a statement. "Among the positive factors are consumers' expectations of low inflation and further economic growth as well as recent increases in residential construction."

Monthly Gain

On a monthly basis, home prices in the 20-city index adjusted for seasonal variations increased 0.8 percent in October after climbing 0.5 percent the month before. The Bloomberg survey median called for a 0.6 percent gain. 

Property prices rose in all 20 U.S. areas in October from a month earlier, led by 1.3 percent gains in San Francisco, Seattle and Tampa, Florida. At 0.2 percent, the smallest increases were registered in San Diego, Detroit and Las Vegas.

Unadjusted, values climbed 0.1 percent in the 20-city index after a 0.2 percent gain.

Less Momentum

Housing data have shown some softness in recent weeks, indicating momentum in the industry may be cooling during what's typically a slow time of the year. Homebuilder confidence slipped this month, sales of existing homes fell in November amid regulatory changes and purchases of new homes last month sold at a slower pace than projected.

New construction has been one bright spot for the industry. Housing starts rebounded in November, with work beginning on the most single-family houses since January 2008 and permits for similar projects reaching an eight-year high.

To maintain such a pace, builders will need proof that demand remains solid into 2016. Labor-market improvement that brings faster wage gains would go a long way toward giving consumers the means and the confidence to buy a home, especially as the prospect of higher mortgage rates looms after the Fed's first increase in interest rates since 2006.

Icahn Sweetens His Bid for Pep Boys to More Than $1 Billion – Bloomberg

Bridgestone Corp. will decide this week whether it will top Carl Icahn's bid for Pep Boys after the billionaire investor raised his offer for the car-parts chain to more than $ 1 billion.

The Japanese tire maker will decide its next move within three business days, spokesman Fusamaro Iijima said Tuesday in an e-mail. Hours earlier, Icahn Enterprises escalated a bidding war with an $ 18.50-a-share cash proposal, and said it would be willing to boost the proposal even further if Pep Boys doesn't increase the termination fee in its deal with Bridgestone.

The takeover battle for Pep Boys underscores the confidence Icahn and Bridgestone have in the U.S. auto-parts retailing industry, which has benefited from an aging vehicle fleet on American roads. The automotive retailer agreed to a sweetened, $ 17-a-share takeover offer from Bridgestone last week, following an earlier bid from Icahn.

Both Bridgestone and Icahn are seeking to expand their presence in the tire and automotive-repair sector by adding Pep Boys' 800 locations across more than 30 states. Bridgestone operates more than 2,200 tire and automotive centers in the country. Icahn, meanwhile, plans to combine Pep Boys with the Auto Plus chain, which he acquired earlier this year.

Icahn's increased offer sent Pep Boys' stock up as much as 7.1 percent to $ 18.65 in late trading. Shares of the company, whose full name is Pep Boys — Manny, Moe & Jack, had already gained 77 percent this year, largely driven by the bidding war. Bridgestone rose 0.5 percent to 4,155 yen as of 2:17 p.m. in Tokyo.

Pep Boys trades at 64 times forward 12-month earnings, versus the 18 times average for U.S. auto retailers, according to data compiled by Bloomberg.

The company, based in Philadelphia, said in a statement that Icahn's proposal proposal was superior and gave Bridgestone until 5 p.m. New York time on Dec. 31 to make another offer or terminate their agreement. Icahn had previously said he was willing to pay at least $ 18.10 a share and was puzzled by Pep Boys' board opting for the Bridgestone offer.

"We cannot understand the actions of the directors in that they know we were willing to offer a lot more than $ 17," he said last week.

Asia stocks rise as crude prices stabilize – Reuters

Employees of the Tokyo Stock Exchange (TSE) work at the bourse in Tokyo August 26, 2015.

Reuters/Yuya Shino

Asian stocks poked into positive territory on Tuesday, shrugging off early losses as Chinese shares rose a day after marking their biggest loss in a month and crude prices took back some lost ground.

Financial spreadbetters at IG expected Britain’s FTSE 100 to open up by 2 points, while Germany’s DAX and France’s CAC were both seen rising by 0.6 percent.

“Asian markets have looked past the wobble in oil prices and Chinese data yesterday to push tentatively into the green,” Angus Nicholson, market analyst at IG in Melbourne, said in a note to clients.

“However, volumes are very low throughout the region, even lower than the pre-Christmas trade last week, so it is difficult to read too much into them,” he added.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent. But it remained on track to mark a loss of around 12 percent for 2015, a year that saw it log a more than seven-year high in April.

China’s blue-chip CSI300 index added 0.7 percent, while the Shanghai Composite Index was up 0.5 percent, as the central bank vowed to maintain reasonable credit growth and keep the yuan stable.

Both indexes had skidded more than 2 percent in the previous session as weak industrial profit data and a looming revamp of how companies will be listed, weighed on the market.

Japan’s Nikkei erased earlier losses and ended up 0.6 percent, while South Korea’s KOSPI was up 0.1 percent.

Australian stocks rallied 1.2 percent, gaining for the eighth consecutive session after reopening following a four-day long holiday weekend.

Crude oil futures stabilized after both Brent and U.S. crude prices dropped more than 3 percent on Monday. Brent edged up about 0.1 percent a barrel to $ 36.67, though it was still not far from an 11-year low of $ 35.98 struck last week, while U.S. crude added about 0.2 percent to $ 36.89.

Their overnight tumble sent U.S. energy shares down 1.8 percent, the worst performing of the major S&P sectors. Wall Street marked modest losses after trading resumed following the Christmas break, with this week’s activity expected to remain thin until after the long New Year holiday weekend.

Spot gold rose 0.5 percent to $ 1,073.80 an ounce after falling overnight in line with crude.

“Over the short-term, the precious metal will likely trend sideways, as funds look to close out the year and contemplate heading into next year with a fresh slate,” said INTL FCStone analyst Edward Meir.

In currencies, the dollar edged down about 0.1 percent to 120.32 yen, within striking distance of a two-month low of 120.05 struck late last week.

The greenback has been sapped by profit taking after the Federal Reserve this month hiked interest rates for the first time in nine years. Investors are waiting for the Fed to send fresh signals about when the second rate hike could take place in 2016 to determine the dollar’s near-term direction.

The euro nudged up 0.1 percent to $ 1.0976.

The dollar edged down against its Canadian counterpart to C$ 1.3873 after the loonie slipped overnight in line with weakening crude oil prices. The Canadian unit plumbed an 11-year low of C$ 1.4003 against the dollar earlier this month.

“We are looking for USD/CAD to break 1.40 and head toward 1.45 in the first half of 2016. The oil industry is experiencing its biggest downturn since the 1990s and prices could fall another $ 10 a barrel before bottoming,” wrote Kathy Lien, managing director at BK Asset Management.

The Australian dollar gained about 0.2 percent to $ 0.7265 while the New Zealand dollar rose 0.3 percent to $ 0.6868.

China’s yuan briefly touched its weakest level in 4-1/2 years against the greenback on strong dollar demand, following the central bank’s lowest midpoint fix since June 2011.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Kim Coghill and Sam Holmes)