Asian shares slipped for a seventh straight
session Thursday as a mixed batch of U.S. economic data did nothing to
assuage concerns about global growth and deflation, keeping sovereign
bonds well supported.
Activity was sparse with Japan still on holiday and many investors taking cover ahead of the U.S. jobs report on Friday.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.1 percent, to be down 5 percent over the past two weeks.
"I think what has taken place more than
anything else over the past 48 hours is the questioning of the reflation
trade that was starting to be latched on by many, especially when you
consider the recent price action in the USD, commodities and equities,"
CitiFX analysts said in a note.
"If that reflation trade notion is in fact
dying, the unwind of the past few weeks of price action would
potentially be the more significant reaction in markets."
One shift already under way was a revival in demand for sovereign bonds, a favored hedge against deflation.
Yields on 10-year U.S. Treasury notes were at
their lowest in two weeks at 1.777 percent, a notable rally from last
week's top of 1.94 percent.
The equivalent yield in Australia has plunged
no less than 31 basis points in the past week as record-low core
inflation forced the central bank to cut its cash rate to an all-time
low.
The rush to bonds has left equities out in the
cold. The Dow ended Wednesday down 0.56 percent, while the S&P 500
eased 0.59 percent and the Nasdaq 0.79 percent.
The pan-regional FTSEurofirst 300 index fell 1.2 percent to its lowest close in nearly four weeks.
A MIXED BAG
Wall Street slipped even as data showed the
vast U.S. services sector expanded in April as new orders and employment
accelerated, offering hope economic growth would rebound after a
sluggish first quarter.
Yet other figures showed private employers
hired the fewest workers in three years, sparking concerns the
all-important payrolls report might also disappoint.
Friday's jobs figures are forecast to show a solid gain of 202,000 in April with unemployment steady at 5 percent.
A weak outcome could push back the timing of
the Federal Reserve's next hike in rates and put fresh pressure on the
dollar. The U.S. currency has steadied in the last couple of days having
taken a beating against the yen and euro.
The dollar was holding at 107.14 yen early
Thursday, above the recent 18-month trough of 105.55 but a long way from
last week's peak of 111.88.
The euro changed hands at $1.1487, having been
as high as $1.1614 this week from a low of $1.1213 in April. Against a
basket of currencies the dollar was all but flat at 93.231.
In commodity markets, industrial metals such
as copper and iron ore were nursing losses, though oil bounced in early
Asian trade.
Traders said the gains could be linked to an uncontrolled wildfire near Canada's oil sands region that was reducing production.
Brent crude was quoted 73 cents higher at $45.31 a barrel, while U.S. crude added 75 cents to $44.53.
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