* MSCI Asia ex-Japan inches up, Nikkei tumbles on profit
taking
* Dollar vulnerable after weak manufacturing ISM
* Reserve Bank of Australia stands pat, keeps door open for
easing
* European shares likely resume trade with decline
By Chikako Mogi
TOKYO, April 2 (Reuters) – Asian shares were capped while
the dollar eased on Tuesday, with investors growing cautious
ahead of new indicators that could flag slowing U.S. economic
momentum.
The private ADP employment report and the latest weekly
jobless claims figures precede the key monthly U.S. nonfarm
payrolls report on Friday.
European markets were likely to return from Easter holidays
on a decline, with financial spreadbetters predicting London’s
FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX
to open down as much as 0.3 percent. Benchmark indices
in Spain and Italy were likely to drop 0.8
percent and 0.7 percent respectively at the open.
U.S. stock futures were steady, pointing to a calm
Wall Street start after falling overnight. The Institute for
Supply Management’s index of national factory activity slipped
in March with new orders, a key indicator of future growth,
accounting for much of the fall.
Oil and copper, markets sensitive to industrial demand, fell
as investors focused on Monday’s official Chinese factory
activity report which came in below forecasts.
“You see the U.S. economy settling into a long, hard grind
of moderate growth of around 1 to 1.5 percent, growth in
previous recoveries was closer to 3.5 percent,” said Ric
Spooner, chief market analyst at CMC Markets in Sydney.
“With this kind of growth, the United States is going to
struggle to bring down unemployment which is a real drag on the
economy.”
A run of generally solid U.S. economic reports helped
restore global risk appetite despite worries in the euro zone
after the Cyprus bailout and some growth concerns in China.
The MSCI’s broadest index of Asia-Pacific shares outside
Japan gave up earlier gains to inch down 0.1
percent, pulled lower by a 1 percent slide in South Korean
shares and weak Chinese shares.
But Australian shares bucked the trend and rose 0.4
percent, as investors returned from the Easter break looking for
bargains after last week’s dip. The Reserve Bank of Australia
helped, keeping its main cash rate at a record low of 3.0
percent but leaving open the possibility of further easing.
DOLLAR LOSES MOMENTUM
“Investors are not making big bets following subdued
manufacturing data in the United States and China and ahead of
two major events later this week,” Lee Jae-man, an analyst at
Tong Yang Securities said, referring to meetings of central
banks in Japan and Europe.
The Nikkei stock average tumbled as much as 2.7
percent to a one-month low before trimming some of the losses to
fall 0.8 percent. The index logged its best quarterly
performance in nearly four years in the first three months of
2013.
Both the Bank of Japan and the European Central Bank hold
policy meetings later in the week. The BOJ is expected to
announce fresh stimulus measures under its new leadership in
line with Prime Minister Shinzo Abe’s drive to reflate the
economy.
The weak U.S. data weighed on the dollar, pushing it down to
a one-month low of 92.57 yen. The euro fell 0.3 percent
to 119.20 yen, its lowest since Feb. 26.
Benchmark 10-year U.S. Treasury yield inched
closer to 1.8 percent after topping 2 percent in early March for
the first time in almost a year. Ten-year Japanese government
bond yield has declined from around 0.7 percent
early in March to a near-decade low of 0.51 percent last week,
before rebounding to around 0.56 percent.
“Expectations for an expansionary U.S. economy are weakening
and long-term yields are falling, that’s what is primarily
driving the dollar lower,” said Koji Fukaya, CEO and currency
strategist of FPG Securities in Tokyo.
A weak yen trend which had been in place since last November
had transformed into a strong dollar trend on signs of stronger
U.S. growth earlier this year, but the latest soft indicator
stoked concerns about such growth prospects.
“In such a context, markets were ripe for position
adjustments, also as the second quarter may see effects of U.S.
fiscal tightening taking a toll on the economy, even if the
underlying recovery path remains firm,” Fukaya said.
The waning of the dollar’s relative outperformance and
Cyprus at least avoiding bankruptcy were preventing the euro
from falling through recent lows, although the currency faced
more downside than the upside due to its wobbly fundamentals,
traders said.
The euro inched up 0.1 percent to $1.2860, moving
away from a four-month low of $1.2750 touched last week.
U.S. crude futures fell 0.4 percent to $96.69 a
barrel while Brent eased 0.3 percent to $110.76.
London copper fell 1.2 percent to $7,452 a tonne,
after touching a seven-month low earlier.
A weak dollar benefited bullion, keeping spot gold
above $1,600 an ounce, but investors were loth to build
positions too much ahead of Friday’s payrolls data.
“I think sentiment is neutral. It can’t break through
$1,620-$1,625, but on the downside, we can say $1,590-$1,585
seem to be the floor,” said Ronald Leung, director of Lee Cheong
Gold Dealers in Hong Kong.
