Asian shares edge down, rising US yields helps dollar

Pressure on euro ahead of ECB meet

Asian shares edged down on Wednesday 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%, 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%, 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. The US nonfarm payrolls report for May is expected to show that employers added 218,000 jobs, according to the median estimate of 105 economists polled by Reuters.

 

"Friday’s payrolls will provide an important test of whether the rise in US 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% at 102.69 yen. 

 

The dollar index, which tracks the greenback against a basket of six major rivals, added 0.1% 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% 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.

 

Reuters reported last month that the ECB is preparing a package of policy easing options for its meeting on Thursday that includes interest rate cuts.

 

Euro zone inflation data on Monday gave the ECB more evidence that steps are needed, as the inflation rate unexpectedly fell to 0.5% in May from 0.7% in April. Economists polled by Reuters had expected inflation to remain steady.

 

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% to $102.73 a barrel, after industry data showed a bigger-than-expected fall in US crude stockpiles.