Asian stocks retreated from 13-month highs today as a conflicting picture about the strength of US economic recovery stopped investors from extending this week's rally but gave some respite to a battered US dollar.
European stocks futures were down 0.4 per cent while US equity futures were 0.3 per cent lower, pointing to a weak start for shares in Europe and the United States.
Investors in Japan were cautious ahead of a stretch of public holidays early next week even though the Bank of Japan deputy governor, Hirohide Yamaguchi, said a positive business cycle was starting and signalled the central bank could soon withdraw emergency support for corporate funding.
"A pickup in the global economy is expected to continue for some time," Mr Yamaguchi told a forum in Tokyo.
The Nikkei index fell 0.7 per cent, breaking a three-day rally.
Shares in Shanghai were down 1.7 per cent by early afternoon as investors fretted about the prospect of a sharp rise in shares from upcoming IPOs and worried that recent gains may be overdone.
Stock market jitters took pressure off the dollar, which held above one-year lows reached on Thursday against a basket of currencies, although analysts said its respite could be temporary.
Investors across Asia stood back after equities hit their highest level in 13 months yesterday. While there is growing confidence the global economy is on an uptrend there is uncertainty about the strength of that recovery.
Data yesterday showed US housing starts hit their highest level last month since November, but a rise in the number of Americans drawing long-term unemployment compensation tempered optimism for a sharp rebound in the world's biggest economy.
The MSCI index of Asia Pacific stocks traded outside Japan dipped 0.6 per cent, after surging 80 per cent since mid-March when markets started to rally on investors' hopes that the financial crisis had bottomed out.
Shares in Korea bucked the region as the KOSPI index eked out a 0.3 per cent gain, helped by foreign investors picking up shares before global index compiler FTSE promotes South Korea's share market to developed market status, from advanced emerging market, from Monday.
Japanese government bond futures rebounded in early trade as Tokyo stocks fell, but December 10-year JGB futures were virtually flat by late afternoon at 138.55.
Finance Minister Hirohisa Fujii said the government could cut new JGB issuance this fiscal year when the new government reviews an extra budget compiled by the previous government, but gave no details.
Gold edged up to $1,012.20 an ounce from its New York close at $1,011.45, but below an 18-month high of $1,023.85 yesterday.
Seen as a hedge against potential inflation, gold is likely to stay firm and many market participants still expect it to break through its record high of $1,030.80.
Otherwise, commodity prices slipped on uncertainty about the strength of the global economic recovery and the oil price edged down 34 cents to $72.13 a barrel.
Weaker commodity markets put pressure on shares of Australian resources companies, such as mining giant BHP Billiton which fell 2.3 per cent, and helped push the Aussie dollar below yesterday's one-year high.
Reuters