Asian shares pull back from three-week highs, U.S. data eyed

By Hideyuki Sano

TOKYO (Reuters) - Asian shares stepped back from three-week highs on Thursday, snapping a five-session winning streak that was underpinned by receding concerns about global growth prospects and reassurance over U.S. monetary policy.

There was also an element of caution, with some investors restraining bullish instincts until they see more solid evidence of a strengthening global economy.

European shares are seen slipping, with both Germany's DAX and Britain's FTSE expected to fall as much as 0.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7 percent after having gained 4.5 percent in the previous five sessions. Japan's Nikkei fell 1.8 percent after a 4.6 percent rise in the past three days.

Markets are still sitting on solid gains that stem from relief over the continuity in Federal Reserve policy and pressure coming off emerging markets.

Janet Yellen, made it clear on Tuesday, in her first public remarks since becoming Fed chair, that she would not make any abrupt changes to monetary policy.

Adding to the positive mood, Congress approved legislation on Wednesday to increase the U.S. government's debt limit for a year, avoiding chances of a repeat of the political showdown that led to government shutdown in October.

Yet recent U.S. data, including two straight months of weak jobs growth, have raised questions over whether the world's biggest economy can sustain the strength it showed in the second half of last year.

"There are emerging doubts about whether you can just blame all the soft data on the weather," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Investors are a bit bewildered. While they are relieved that major events are out of the way, they are still hesitating to chase shares higher," he added.

Doubts could intensify if further data falls short of market expectations, although traders admit there is a chance the market could write off any soft reading as a one-off aberration due to the severity of the winter in the United States.

Next up on the data front are January retail sales and weekly jobless claims data, both due to be released at 1330 GMT.

On Wall Street, shares were almost flat on Wednesday after a four-day rally as investors pondered whether valuations had become stretched.

There were still some doubts over the quality of data released earlier in the week that showed import growth in China at a six-month high, with some analysts wary that the figures could be inflated by fake trade transactions to circumvent capital controls.

In the currency market, the British pound stood out after a surprisingly upbeat economic outlook from the Bank of England prompted markets to price in an interest rate hike in early 2015.

The sterling edged up to $1.6618, getting near its 2 1/2-year high of $1.6667 hit late last month.

In contrast, the euro slipped to $1.3614, pulling further away from highs of $1.3684 hit on Tuesday after dovish comments from a top European Central Bank official.

Executive Board member Benoit Coeure described chances that the ECB would cut into negative territory the rate paid to banks to hold their deposits overnight as "a very possible option".

"Coeure's comments cannot be lightly dismissed and stoke expectations for action at the March meeting," said Sean Callow, currency strategist at Westpac in Sydney.

The Australian dollar tumbled around one percent across the board after data showed the Australian jobless rate at its highest in a decade, reviving speculation that interest rates may be cut again in coming months.

The Aussie traded at $0.8934, slipping from four-week high of $0.9068 marked on Wednesday.

As risk assets took a back seat, oil prices fell with U.S. crude futures dropping 1.6 percent from four-month highs hit on Wednesday. Gold prices also eased to $1,288, after racing to a three-month high of $1,295.91 the previous day.

(Additional reporting by Ian Chua in Sydney; Editing by Simon Cameron-Moore & Shri Navaratnam)