Growth woes douse rally in Asian shares, dollar slips

SYDNEY (Reuters): Asian stocks stepped back from near eight-month highs on Thursday and the dollar eased as European and US central banks reinforced investor worries about the global economic outlook and trade protectionism.

In a fresh escalation of trade tensions, US President Donald Trump has threatened new tariffs on goods from the European Union even as the Sino-US trade dispute remains unresolved.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3% after four straight days of gains took it to the highest since last August.

Chinese shares were subdued with the blue-chip CSI300 off 1% while Hong Kong’s Hang Seng index stumbled 0.6%.

Australian shares also lost ground, pressured by political uncertainty after the country’s prime minister called a national election for May 18.

Japan’s Nikkei fell 0.3% as the yen strengthened.

On Wednesday, the European Central Bank (ECB) kept its loose policy stance and warned that threats to global economic growth remained. The ECB has already pushed back its first post-crisis interest rate hike, and President Mario Draghi raised the prospect of more support for the struggling euro zone economy if its slowdown persisted.

Separately, data showed US consumer prices increased by the most in 14 months in March but underlying inflation remained benign against a backdrop of slowing global economic growth.

Minutes from a March 19-20 meeting of Federal Reserve policymakers showed they agreed to be patient about any changes to interest rate policy as they saw the US economy weathering a global slowdown without a recession in the next few years.

US Treasury yields slipped in response, reinforcing expectations that the Fed would hold rates steady or possibly cut them by the end of the year.

Those expectations helped European and US shares overnight. On Wall Street, the S&P 500 added 0.35%, the Nasdaq climbed 0.7% while the Dow was barely changed.

In currencies, the British pound was slightly higher at $1.3099 after European leaders agreed to extend the deadline for UK to leave the union to the end of October, averting a potential crash out of the bloc on Friday with no divorce deal.

Sterling has stayed in a triangle holding pattern between $1.2945 and $1.3380 during the past month or so.

The dollar index fell for a fourth straight day to 96.931 against a basket of major currencies. The euro was barely changed at $1.1277 while the Japanese yen paused after three days of gains at 111.04.

Gold hovered near a two-week top on Thursday at $1,307.03 an ounce.