Global Markets Asian shares pause as US rally raises Fed QE doubts

Business & Markets 2013
Written by Reuters
Wednesday, 29 May 2013 14:18
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TOKYO (May 29): Asian shares and the Australian dollar eased on
Wednesday as strong economic data rallied U.S. stocks to record
highs, throwing market focus back on to the possibility of reduced
Federal Reserve monetary stimulus in the future.
European stock markets are expected to track Asian peers lower, with
financial spreadbetters predicting London's FTSE 100 , Paris's CAC-40
and Frankfurt's DAX to open as much as 0.3 percent lower, while a 0.1
percent rise in U.S. stock futures pointed to a more solid start at Wall
Street.
MSCI's broadest index of Asia-Pacific shares outside Japan was down
0.2 percent at 467.76, moving towards Friday's five-week low of
464.99.
But losses were limited, with sentiment underpinned by the rise in the
Dow Jones industrial average to another record high on Tuesday after
data showed U.S. home prices accelerated by the most in nearly seven
years in March, while consumer confidence picked up in May to its
highest in more than five years.
The rally in global markets overnight was driven by bets on some funds
would leave emerging markets go back to their home countries, and
investors choosing to focus on the growth implications of strong U.S.
data, ignoring that it could add to speculation of the Federal Reserve
scaling back its bond-buying programme, said Credit Agricole CIB's
senior strategist Frances Cheung in Hong Kong.
"So, back in Asia, investors may be more worried about expectations for the Fed's tapering off because Asian markets have
been benefitting a lot from the easy money from the U.S.," she said. Asian equities markets were likely undergoing a
consolidation and moving sideways while investors try to sort out their story, she added.
Australian shares added 0.1 percent while South Korean shares rose 1 percent. Hong Kong shares fell 0.7 percent but
Shanghai shares were up 0.2 percent.
"The falling Australian dollar is leading offshore investors to offload some of those local assets, that's leading to price
declines. They're trying to avoid getting negative real returns as the Australian dollar continues to weaken," said Tim Radford,
global analyst at stockbroker Rivkin, of Australian stocks.
Speculation about the Fed's policy has weighed on the Australian dollar, which has skidded nearly 8 percent in May, the
largest monthly drop since September 2011. The Aussie plumbed its lowest in 19 months on Wednesday after key support
around $0.9581 finally gave way.
"Breaking through important support levels like that means it won't settle down for a while. It would be great of course if you
bought it now and it returned to its previous level, but it's best not to try that," said Kenichi Asada, manager of forex at Trust &
Custody Services Bank.
The Nikkei stock average climbed 1.1 percent in a volatile session, having nearly lost all gains earlier in the day.
The Nikkei slumped 7.3 percent on Thursday, its largest single-day loss since the March 2011 earthquake and tsunami, as
global financial markets were shaken by weak industrial production in China and concerns about the Fed toning down its
aggressive monetary stimulus sooner than previously thought.
Tuesday's stock rally lifted benchmark 10-year U.S. Treasury yield to a 13-month peak around 2.17 percent.
Japanese government bond prices eased slightly on Wednesday following the sharp fall in U.S. debt prices.
The dollar inched up 0.1 percent against the yen to 102.42, off a two-week low of 100.66 yen hit on Friday, but still below a
4-1/2 year peak of 103.74 yen touched on May 22.
The dollar index measured against a basket of six key currencies rose 0.3 percent to remain near its highest since July 2010
of 84.498 reached on May 23.
U.S. crude futures fell 0.3 percent to $94.75 a barrel and Brent eased 0.1 percent to $104.11.
"People are starting to realize that the U.S. has got to lead us out of this economic slump," said Tony Nunan, an oil risk
manager at Mitsubishi in Tokyo. "The main worries are unemployment and housing, and housing seems to be on a steady
growth path."
Gold edged up 0.1 percent on strong demand from China after prices fell 1 percent in the prior session, but persistent
outflows from exchange-traded funds capped gains.
Relative calm in risk assets steadied Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade
index little changed from Tuesday. - Reuters