Asian shares falter, dollar gains

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IOL pic jan7 asian markets yen Associated Press Government debt falls as Japanese boost foreign holdings.

Tokyo - Asian shares fell to a near four-month low on Tuesday, though the dollar rebounded after overnight weakness on disappointing U.S. services sector data that raised concerns about stuttering growth in the world's largest economy.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent, heading for a fifth straight day of losses.

Japan's Nikkei index shed 0.6 percent, adding to a 2.4 percent slide on Monday, its first trading day of 2014.

U.S. stocks slipped on Monday after a mixed batch of economic reports, resulting in the Standard & Poor's 500 losing in the first three trading sessions of 2014 after ramping up 30 percent last year.

S&P 500 E-mini futures gained 0.2 percent in Asian trade on Tuesday, indicating a firmer open on Wall Street later in the day, however.

Financial bookmakers also expected UK, German and French equities to open steady to modestly higher on Tuesday.

SERVICES SECTOR SLOWS

Data from the Institute for Supply Management showed the pace of growth in the U.S. services sector slowed for a second straight month in December with business activity expanding at a slower rate and new orders contracting.

A separate report from financial information firm Markit said its services sector purchasing managers index eased slightly in December from the prior month, but data from the U.S. Commerce Department showed new orders for factory goods rebounded in November, as expected.

All eyes in the market will be on Friday's nonfarm payrolls data, which will provide new clues on how well the U.S. economy is recovering and how fast the Federal Reserve might unwind its stimulus programme, which it began to taper last month, and how long it will keep its interest rates low.

“No more than 20 percent of investors think that there is a serious chance that the Fed will hike before the middle of 2015,” Steven Englander, global head of G10 FX strategy at Citigroup, wrote in a note.

“A nonfarm payroll print of 250,000 or more would raise alarm among investors that the recovery was getting out of hand and that the Fed would be behind the curve.”

He said commodity and emerging currencies would be sold off in such a scenario, while the euro and the Swiss franc could be a safe haven.

The Indonesian rupiah lost 0.7 percent to 12,255 per dollar, edging closer to a five-year trough of 12,278 set on Dec. 27.

KEEP CALM AND CARRY ON

Against a basket of major currencies, the dollar added 0.1 percent, recouping some of the softness after the U.S. services data.

“We expect to see good interest to buy USD on dips heading into the jobs release,” analysts at BNP Paribas wrote in a note.

The euro was a tad softer at $1.36215, having come off a four-week low of $1.35715 set in the previous session, while the greenback was up 0.3 percent at 104.53 yen, covering some of Monday's 0.6 percent decline.

According to data from the Commodity Futures Trading Commission, currency speculators pared bets in favour of the dollar in the week ended Dec. 31 to the lowest in about six weeks.

Before Friday's jobs report, investors will focus on the minutes of the Fed's December policy meeting, due out on Jan 8, and the European Central Bank's policy gathering on Thursday.

Late on Monday, the U.S. Senate confirmed Janet Yellen, a key force behind the Fed's unprecedented and controversial efforts to boost the U.S. economy, as the next Fed chair to succeed Ben Bernanke, whose second four-year term expires on Jan. 31.

Among commodities, U.S. crude futures put on 0.2 percent to $93.62 a barrel after having fallen 0.6 percent overnight to a one-month low.

Gold advanced 0.4 percent to $1,242.04 an ounce, heading for a sixth straight day of gains and sitting not far from a three-week high of $1,248.30 set on Monday.

“We have been rather surprised by gold's resilience over the course of the last week, but suspect that it's upside staying power will be limited,” INTL FCStone analyst Edward Meir said. -Reuters


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