Tokyo — Asian shares eased on Thursday after
rallying to their highest in nearly 17 months the day before, while
commodities fell as talks to avert a US fiscal crisis stalled –
prompting worries of the world's largest economy sliding back into
recession.
The yen remained under pressure as
the Bank of Japan concludes its two-day policy meeting later in the
session, with market participants expecting further monetary easing
steps to support the fragile economy.
MSCI's
broadest index of Asia-Pacific shares outside Japan was down 0.2 percent
but held near its highest in nearly 17 months, while Hong Kong shares
also fell 0.4 percent after hitting a near 17-month high the day before.
Australian shares defied the general bearish trend to add 0.5 percent
to a 17-month high and Seoul shares rose 0.3 percent on speculation
conservative Park Geun-hye's victory in the presidential election would
pave the way for fresh stimulus measures from the government.
Sentiment turned cautious towards risk assets, hurting commodities and
commodity-linked currencies while keeping gold barely above its
3-1/2-month low hit earlier in the week. The dollar edged up 0.1 percent
against a basket of major currencies .
Global
stocks trimmed gains on Wednesday after reaching a 17-month high as
talks to avoid the US "fiscal cliff" appeared to stall.
President Barack Obama accused Republicans of digging in their heels
due to a personal grudge against him, while a top Republican called the
president "irrational."
"If this discussion
continues to go as it has gone today (Wednesday), watch for more selling
off as hopelessness begins to take hold for many investors across all
asset classes," said Neal Gilbert, market strategist at GFT Forex, in a
note to clients.
"Ironically, the USD may be one
of the biggest beneficiaries of a failure. Rampant buying of US
treasuries and selling of risk assets like the equities market could
create a very significant move, particularly since the rallies seen
earlier have been attributed to the optimism of a deal," Gilbert said.
The Nikkei stock average slumped 1 percent after closing Wednesday up
2.4 percent and above the key 10,000 level for the first time since
April, as expectations for more easing weakened the yen, which improves
earnings prospects for Japanese exporters.
The
Bank of Japan is expected to deliver its third dose of monetary stimulus
in four months on Thursday in a prelude to more aggressive action next
year, as it faces intensifying pressure from the country's next leader
for stronger efforts to beat deflation.
On
Thursday, the BOJ will also announce details of a new loan program
unveiled in October to supply banks with cheap long-term funds without
limiting the amount of cash made available.
With markets already very bearish on the yen, traders warned a lack of bold action could see short positions squeezed.
"We may see the yen regain its footing over the next 24-hours of
trading should Governor Masaaki Shirakawa take a greater stand in
preserving the central bank's independence," said David Song, currency
analyst at DailyFX.
The dollar was down 0.3
percent against the yen at ¥84.20 but near Wednesday's 20-month high of
¥84.62. The euro fell 0.3 percent against the yen at ¥111.28, retreating
from a 16-month high of ¥112.59 reached on Wednesday.
The euro was down 0.1 percent to $1.3215, slipping from a 8-1/2-month
high of $1.33085 hit on Wednesday after an Ifo Institute survey showed
German business sentiment improving in December at its fastest rate in
2-1/2 years, boosting hopes Europe's largest economy will bounce back
quickly after a weak end to 2012.
Data from the
Investment Company Institute, a US mutual fund trade organization, on
Wednesday showed investors in US-based mutual funds pulled $8.48 billion
from equity funds for the week ended Dec. 12, reflecting nervousness
caused by the uncertainty over the US fiscal cliff.
US crude fell 0.5 percent to $89.57 a barrel and Brent fell 0.3 percent to $110.
London copper was down 0.4 percent to $7,893 a ton.
Gold has fallen prey to funds taking profits before the year-end
book-closing but having held above a key technical level, bullion's
downside may be limited.
Spot gold steadied around $1,666.81 an ounce, above a 3-1/2-month low of $1,661.01 hit on Tuesday.
The lackluster equities market also slowed trading in Asian credit
markets, keeping the spreads on the iTraxx Asia ex-Japan
investment-grade index barely moved from Wednesday. — Reuters
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