Asian stocks retreat from highs

Filomena Scalise

Filomena Scalise

Published Jul 25, 2013

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Sydney - Asian stocks retreated from seven-week highs on Thursday after Wall Street buckled under profit-taking pressure and as investors were wary as the earnings season got under way, while upbeat US economic news helped the dollar snap a three-day slide.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.5 percent, having closed on Wednesday at its highest since early June. Tokyo's Nikkei dipped 0.3 percent, continuing to find resistance ahead of the 15,000 mark.

“As the market has been in overbought territory technically speaking, investors are staying on the sidelines,” Yasuo Sakuma, portfolio manager at Bayview Asset Management, said of Japanese stocks. “Although the weaker yen lent some support to the market, there are few factors to buy,” he added.

The earnings season kicked off in Japan and South Korea, while results in places such as Australia are set to follow soon, keeping equities in check as investors look to gauge the business outlooks amid challenging growth prospects in the region, including a rapid slowdown in China.

The decline in Asian bourses came after the US S&P 500 index shed 0.4 percent, a modest move and yet still the biggest fall in almost a month.

Analysts said Wall Street was taking a breather as investors booked profits in a rally that has swept the index to a string of record highs. They were also waiting on company results and outlooks before deciding on whether to jump back in.

While stocks failed to gain a lift from encouraging US data, the dollar benefited and bounced against a basket of major currencies.

The figures out on Wednesday showed a further recovery in the housing market and an acceleration in factory activity, supporting the Federal Reserve's views that the economy will continue to recover gradually..

Treasury bond yields rose as a result, which in turn provided support for the greenback.

The dollar index was little changed from late New York levels, having climbed 0.4 percent to be off a one-month low plumbed earlier in the week.

Against the yen, the dollar popped back above 100. It also firmed on the euro, which fell to around $1.3200 from a one-month high around $1.3256.

The euro managed to rise versus other currencies though, scaling a two-month peak against the yen around 132.74 after closely watched surveys showed unexpected growth in euro zone factories.

Markit's flash Eurozone Composite PMI, based on surveys of thousands of companies across the euro zone and a reliable indicator of growth, jumped to an 18-month high of 50.4 in July from 48.7 in June.

Data later on Thursday is expected to show Britain's economy expanded at a faster pace in the second quarter, helped by growing confidence among consumers and by signs that companies are ready to borrow and spend more.

The New Zealand dollar made a strong comeback against the greenback after the country's central bank surprised some by sounding slightly hawkish, even as it pledged to leave the overnight cash rate (OCR) unchanged at a record low 2.5 percent until year end.

“There was a clear tightening bias with acknowledgement that the removal of monetary policy stimulus will 'likely' be needed in the future,” analysts at ANZ highlighted in a note.

“We're still picking early 2014. The precise date is somewhat secondary with the real issue being at what pace and regularity the OCR ends up being lifted. We're in the gradual camp.”

The kiwi was last at $0.7979, having rallied to $0.7986 from a low of $0.7925 after the Reserve Bank of New Zealand's rate statement.

Both US and European data offered cold comfort to commodity investors fretting about a slowdown in China.

Copper fell 0.6 percent to $7,013 a ton, reversing all of Wednesday's 0.2 percent rise. US crude slipped 0.5 percent to $104.86 a barrel, extending its pullback from a 16-month high of $109.32 set last Friday.

Spot gold was steadier at $1,321 an ounce, following a 2.0 percent slide on Wednesday. - Reuters

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