TOKYO, Mar 25: Asian stocks stalled on Wednesday following declines on Wall Street, while the dollar held on to modest gains after a rise in U.S. inflation. MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed by midday after a small bounce the previous day.
South Korean and Australian shares were effectively flat. The volatile Shanghai Composite Index lost 1 percent. Japan’s Nikkei, which has been hitting a succession of 15-year highs, fell 0.6 percent, to 19,608 points, though analysts said it may be a matter of time before the index reached the 20,000 threshold for the first time since 2000. ‘These themes (better earnings and shareholder returns) as well as increasing wages will likely continue attracting foreign investors in the longer term,’ said Jun Yunoki, a strategist at Nomura Securities in Tokyo.
The Dow and S&P both shed 0.6 percent overnight as U.S. equities maintained a loose inverse correlation with the dollar. The strength of the greenback, which earlier in the month soared to multi-year highs against its peers, has become a concern due to its potential negative impact on U.S. corporate earnings.
European stocks, on the other hand, hit near record highs the previous day on stronger-than-expected euro zone manufacturing data. The European Central Bank’s extensive quantitative easing policy has been a boon to European shares. The euro was little changed at $1.0933 after slipping from an overnight peak of $1.1029 briefly reached on the upbeat euro zone data.
The common currency has steadily recovered from a 12-year low of $1.0457 hit last week after a dovish-sounding Federal Reserve dimmed prospects for an earlier interest rate hike and blunted the dollar’s advance.
The dollar was steady at 119.59 yen following an overnight bounce from a low of 119.22. A decline in U.S. Treasury yields limited the dollar’s gains.
The U.S. currency was still some distance from an eight-year peak of 122.04 scaled two weeks ago when expectations for an earlier Fed rate hike were stronger. The yield on benchmark 10-year Treasury notes slipped to a six-week low overnight thanks to a weaker Wall Street, with the debt market brushing aside a 0.2 percent rise in U.S. February consumer price index.
The drop by the 10-year Treasury yield is an indication ‘that while equities are pricing in Fed tightening, bond traders are not concerned about rising rates,’ Kathy Lien, managing Director for FX strategy at BK Asset Management wrote in a note to clients.
In commodities, Brent crude oil was firm after falling the previous day on the dollar’s strength and persisting fears of global oversupply.
Brent crude was little changed at $55.13 a barrel. (AGENCIES)
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