Asian shares tiptoe up, US bonds fall after Fed taper
Saturday, 21 December 2013 00:00
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REUTERS: Asian shares crept higher on Friday, though investors were reassessing the Federal Reserve’s policy outlook following its decision this week to start tapering stimulus, with a more circumspect session on Wall Street overnight.
US Government bond prices fell overnight on emerging doubts about the Fed’s commitment to rock-bottom interest rates.
Gold tumbled to a near six-month low, extending months of weakness after the US central bank finally scaled back its stimulus that has pushed the precious metal to record territory in recent years. Gold is on track for its worst yearly decline since 1981.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.2% in early trade. It erased early gains to end a touch softer in the previous session following the Fed’s taper decision.
Tokyo’s Nikkei benchmark shed 0.5%, ahead of the outcome of a two-day Bank of Japan policy meeting. The index rallied 1.7% to its highest closing level in six years on Thursday as the yen slid.
Analysts said the Fed’s smooth start in trimming its stimulus by $ 10 billion to $ 75 billion a month without disrupting markets removed one uncertainty for the BOJ, giving it more time to decide whether further monetary expansion will be needed next year.
The yen was down 0.1% at 104.32 yen to the dollar, within striking distance of a more than five-year trough of 104.37 yen set on Thursday.
The euro eased 0.2% to $ 1.36375, hitting a two-week low. Against a basket of major currencies, the dollar was up 0.1% at 80.741, a two-week high.
“With the Fed now having begun the tapering process, the burden of proof now seems to be on the side of the data to weaken sufficiently to force a halt,” analysts at BNP Paribas wrote in a note.
Thursday’s data showed US home re-sales hit a near one-year low in November and new filings for unemployment benefits unexpectedly rose last week, dulling an otherwise brightening economic picture.
Overnight, US stocks finished mostly flat as investors paused after a rally in the previous session, though the Dow Jones industrial average .DJI closed at its second record high in a row. US S&P 500 E-mini futures inched up 0.1% in early Asian trade on Friday.
The 10-year US Treasury yield jumped as high as 2.9512% on Thursday, hitting a three-month peak.
Deutsche Bank analysts said they expected the US unemployment rate to fall faster than the Fed projections and the risk was that inflation pressures would start to mount earlier than the US central bank anticipated.
“They will not be able to follow the very gradual path of rate hikes the market expects,” the analysts said in a report.
In a move likely meant to pre-empt any sharp market reaction that could undercut the recovery, the Fed also said in its tapering announcement that it “likely will be appropriate” to keep overnight rates near zero “well past the time” that the US jobless rate falls below 6.5%.
Among commodities, US crude prices slipped 0.4% to $ 98.70 a barrel, paring some of Thursday’s 1% rise on the back of US refinery oil demand to meet robust distillate exports.
Gold hit a near six-month low of $ 1,185.30 an ounce earlier on Friday, though it rebounded 0.3% after having slumped 2.3% overnight. The metal is down nearly 29%, heading for its worst annual decline since 1981.
