Asian shares, Euro pause ahead of ECB decision

Friday, 8 February 2013 00:01 - - {{hitsCtrl.values.hits}}

TOKYO (Reuters): Asian shares and the euro paused from recent gains on Thursday, as investors awaited the European Central Bank’s policy meeting later in the day and President Mario Draghi’s view on euro zone growth prospects, optimistic that the worst may be over.

“Risk assets traded heavily as market participants exercise caution ahead of the ECB, particularly with Europe’s political crisis hampering sentiment,” said Stan Shamu, market strategist at IG Markets. “There has been growing talk of currency wars lately and some are now saying the eurozone will soon consider a fixed rate for the single currency.”

European markets are seen in tight ranges, with financial spreadbetters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX would open flat to up 0.1%. A 0.1% drop in U.S. stock futures suggested a soft Wall Street start.

Japan’s Nikkei stock average ended down 0.9%, retreating from its highest level since October 2008 that it scaled on Wednesday as investors took a break from selling the yen.

But shorter-dated Japanese government debt rallied, sending 5-year government bond yields to a record low of 0.135% and 5-year yields to their lowest since September 2002 at 0.030%, on expectations that the central bank will cut interest rates to zero.

The yen’s broad weakness has been driven by expectations for radical reflationary policy from the Bank of Japan, under Prime Minister Shinzo Abe’s push for a mix of anti-deflation policies.

The MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1% near a one-week low, after reaching a 18-month high on Monday.

Growing optimism that the euro zone economy may be nearing a bottom has propelled the euro to a 14-1/2-month high against the dollar, a 34-month peak against the yen and 15-month top on sterling.

The euro steadied around $1.3526, off a 14-1/2-month high against the dollar of $1.3711 hit last week.

The dollar eased 0.1% to 93.57 yen after touching 94.075 yen, its highest since May 2010 on Wednesday. The euro steadied at 126.60 yen, off Wednesday’s 127.71 yen, its strongest since April 2010.

U.S. crude rose 0.1% to $96.76 a barrel and Brent also added 0.2% to $116.90.