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Asia: Shares fall after US dollar slips to 12-week low

Wednesday, February 1, 2017 - 12:27

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[SYDNEY] Asian stocks fell for a second day, led by declines in Japan and Hong Kong, after the US dollar capped its worst month since March as the Trump administration reiterated its preference for a weaker currency.

Japan's Topix extended its longest losing streak of the year, while Hong Kong stocks slumped as trading resumed after a holiday. The greenback remained near the lowest level since November, after falling at least 1.9 per cent in January against its major developed peers.

Oil stayed below US$53 a barrel, while gold was flat after its best rally since June. Apple Inc shares jumped in after-hours US trading as earnings beat estimates.

The US dollar slid Tuesday after President Donald Trump said China and Japan play their money markets and trade adviser Peter Navarro called the euro "grossly undervalued."

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Market voices on:

Several currency strategists alleged the claim against the euro is "false" and urged people to "ignore" Mr Navarro, while OECD data show the euro trades below fair value.

The currency comments came as investors assessed the fallout from Mr Trump's executive order on immigration. The political drama has dimmed enthusiasm for the administration's pro-growth promises and overshadowed data showing the global economy may be firming. Investors are also contending with a spate of corporate results before the Federal Reserve's latest interest-rate decision.

"As uncertainty grows and investors recognise there are some uncertainties around Trumponomics and the reflation of the US economy - they are taking some cash off the table," said Greg McKenna, chief market strategist in Sydney at AxiCorp Financial Services Pty, a trading firm.

"The net result is traders and investors simply retreat to cash, bonds, or their home currency until things settle and the outlook becomes clear."

The Fed is expected to leave lending rates where they are, though its statement on Wednesday in Washington will be parsed for any reading on Mr Trump's impact on the world's largest economy.

Facebook Inc and Amazon.com Inc are among the major US companies due to report results this week. Of the S&P 500 names to report so far, 73 per cent have topped profit estimates.

Stocks

The Topix dropped 0.3 per cent as of 10:49am in Tokyo, retreating for a third straight day. Australia's S&P/ASX 200 Index rose 0.3 per cent, while South Korea's Kospi added 0.5 per cent.  Hong Kong's Hang Seng index fell one per cent as trading resumed after a two-day break. Markets in China, Taiwan, Malaysia and Vietnam remain closed for a holiday.

Contracts on the S&P 500 were little changed. The benchmark for American equities fell 0.1 per cent on Tuesday, trimming a loss that reached 0.6 per cent. It advanced 1.8 per cent in January for a third monthly gain, and is higher by more than 6 per cent since Nov 8.

Apple shares were up 3 per cent in after-hours trading, after the company reported quarterly revenue that topped analyst projections, fuelled by demand for the company's latest and priciest iPhones.

Currencies

The yen fell 0.2 per cent to 112.99 per US dollar, after climbing 0.9 per cent on Tuesday to complete its best monthly rally since June's Brexit-fuelled surge. The Bloomberg Dollar Spot Index was little changed, after completing a 2.6 per cent loss for January and sliding to its lowest level since Nov 11.

The New Zealand dollar slid 0.4 per cent to 72.81 US cents after data showed the nation's unemployment rate unexpectedly jumped.

Bonds

The yield on the 10-year US Treasury note added one basis point to 2.46 per cent. It fell four basis points on Tuesday, leaving the rate little changed on the month.

The rate on similar maturity Australian notes increased one basis point, after the debt rose in January to snap a four-month slide.

AT&T Inc launched a US$10 billion deal on Tuesday after Microsoft Corp sold US$17 billion in debt a day earlier. Those deals pushed January issuance past the all-time monthly record of US$180 billion in May 2016, according to data compiled by Bloomberg.

Commodities

West Texas Intermediate crude fell 0.2 per cent to US$52.73 a barrel as the benefit of a weaker dollar was offset by speculation US supplies gained. Oil slipped 1.7 per cent in January for its first monthly drop since October.

Gold was little changed after capping a 5.5 per cent monthly gain, its best performance since June.

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