Asian shares shed some gains

By Chikako Mogi

TOKYO (Reuters) - Asian shares retreated marginally on Friday after recent gains, with investor confidence underpinned by Wall Street's record-high close overnight, while the yen remained weak, with the dollar nearing 100 yen, a level unseen in four years.

The MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent, with Shanghai shares virtually flat but other regional bourses were higher.

The main drag on the pan-Asian index was a 0.5 percent drop in South Korean shares . That market remains on edge over tensions with North Korea, but analysts ascribed Friday's decline to expectations of weak earnings by South Korean firms.

"Overall, auto earnings are expected to miss forecasts for the January to March period, because of the stronger South Korean won. The yen's slide is also hurting sentiment," said Cho Soo-hong, an analyst at Woori Investment & Securities.

Australian shares edged up 0.05 percent as a drop in mining stocks offset strength among financials and defensive stocks.

Ric Spooner, market strategist at CMC Markets, noted the Australian market had put in some weak performances despite a strong lead on Wall Street recently.

"We had quite a strong run in our market, and our market is probably more generously valued than the U.S. market," he said.

Risk sentiment remained intact, supported by the Bank of Japan launching a stimulus campaign of an unprecedented scale. The BOJ last week pledged to inject about $1.4 trillion into the Japanese economy to end a long phase of deflation and achieve its target of 2 percent inflation.

"We expect the positive market momentum to remain in place in the coming days, creating better entry levels for hedging and profit-taking," Barclays Capital said in a research note.

Having gained nearly 10 percent over the past week to reach its highest since July 2008 on Thursday, the Nikkei stock average fell 0.8 percent as investors booked profits.

"Unless there are strong catalysts to drive the market higher such as the yen further weakening to 100 yen against the dollar, profit-taking is natural given the steep rises," said Yutaka Miura, a senior technical analyst at Mizuho Securities.

The dollar has gained about 6 percent against the yen over the past week, and on Thursday the dollar hit a four-year high of 99.95 yen. the euro climbed as far as 131.10 yen, its highest since January 2010, and the Aussie dollar soared to 105.43 yen, the highest since November 2007.

By midday in Tokyo on Friday, the dollar was at 99.57 yen and the euro was at 130.66 yen.

World equity markets rallied for a fourth day on Thursday, lifted by a surprise drop in the number of Americans seeking unemployment benefits last week, with both the Dow Jones industrial average and the Standard & Poor's 500 Index setting new closing records.

Wall Street rose despite news of a 14 percent plunge in personal computer sales in the first quarter, the sharpest drop in two decades of record-keeping.

The latest U.S. data eased fears of deterioration in U.S. labor market conditions after a surprise stumble in job growth in March.

Sentiment may be dented by signs of tensions in the Korean peninsula.

A Pentagon spy agency concluded for the first time that North Korea likely has the ability to launch nuclear-armed missiles, illustrating the high stakes surrounding the escalating tensions on the Korean peninsula.

But the Pentagon said on Thursday it would be inaccurate to suggest that North Korea has proven it has the ability to launch a nuclear-armed missile.

Spot gold was barely changed but was on track for a third straight weekly drop as strong stock markets lured investors seeking better returns while outflows from exchange-traded funds reflected the precious metal's shaky outlook.

U.S. crude futures eased 0.2 percent to $93.38 a barrel while Brent inched up 0.1 percent to $104.37.

(Additional reporting by Ayai Tomisawa in Tokyo, Hyunjoo Jin and Seong-won Chang; in Seoul, and Thuy Ong in Sydney; Editing by Simon Cameron-Moore)