Asian shares edge down but remain close to highs

Asian shares edged down over-night but remained close to recent highs, while the dollar benefited from rising US Treasury yields and pressure stayed on the euro ahead of expected easing steps from the European Central Bank.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped about 0.3 per cent, pulling away from last week’s one-year high. Japan’s Nikkei stock average inched slightly down from Tuesday’s 2-month closing high, though a weaker yen limited losses and helped traders stay optimistic.

“I think short-term people have already left Japan, so to me, individuals and international long-only are gradually putting on positions in Japan, so it’s quite a healthy demand situation now,” said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo. On Wall Street overnight, shares edged lower but remained close to multi-year highs, with the benchmark S&P 500 ending less than a point off Monday’s record close, and helping to push benchmark US bond yields to three-week highs. The yield on 10-year notes was at 2.587 per cent, slightly down from its US close but well above last week’s 11-month lows.

US economic data on Tuesday showed new orders for factory goods rose for a third straight month in April and automakers recorded solid vehicle sales in May, adding more evidence to support market expectations of an improved second quarter performance. US jobs data on Friday could help determine whether the rise in yields will continue.

"Friday's payrolls will provide an important test of whether the rise in U.S. yields and the dollar can be sustained," strategists at Barclays wrote in a note to clients. "Equities have been resilient in the face of higher core yields due in part to stronger manufacturing output," they said. "Meanwhile, more signs of a bounce in China's growth, coupled with signals of further targeted monetary easing have helped Chinese equities reverse most of the losses since April."

The rise in yields helped the dollar reach a fresh one-month high against the yen at 102.70. It was last up about 0.2 per cent at 102.69 yen. The dollar index, which tracks the greenback against a basket of six major rivals, added 0.1 per cent on the day to 80.641, not far from Monday’s high of 80.681, which was its best level since mid-February. The euro edged down about 0.1 per cent to $1.3613, and remained not far from a four-month low of $1.3585 touched on Monday. The euro slipped modestly to 139.80 yen, moving back toward a four-month low of 137.98 yen hit on Thursday.

The Australian dollar leapt a quarter of a US cent after gross domestic product for the first quarter beat forecasts. In commodities trading, gold was flat at $1,244.87 an ounce after plumbing a four-month low of $1,240.61 on Tuesday. US crude added about 0.1 per cent to $102.73 a barrel, after industry data showed a bigger-than-expected fall in U.S. crude stockpiles.

Reuters