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Asian stocks slip back after latest rally

Wednesday, November 5, 2014 - 11:03
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[HONG KONG] Asian markets retreated Wednesday, with Tokyo suffering its first sell-off after rallying 10 per cent in four days while the dollar managed to maintain its seven-year highs against the yen.

The lead from Wall Street was neutral following a disappointing batch of economic indicators, while the euro edged up despite news that the European Commission had slashed its growth outlook for this year.

Tokyo slipped 0.27 per cent after four days of advances that were bolstered by Friday's shock announcement from the Bank of Japan that it would widen its monetary easing programme.

Hong Kong lost 0.75 per cent and Shanghai eased 0.47 per cent after HSBC released figures showing activity in China's services industry had slowed. Sydney shed 0.59 per cent and Seoul was flat.

Japanese shares enjoyed a huge boost and the yen tumbled after the BoJ decision, which will see vast sums of extra money pumped into the economy in a bid to tackle deflation and avert another recession.

Adding to the buying was news that the country's public pension fund - the world's biggest - will double the amount of equities in its investment portfolio.

"Last week's unexpectedly aggressive Bank of Japan easing action, combined with the Government Pension Investment Fund's stock-heavy allocation shift, has been a game-changer for equity markets," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Still, some profit-taking is eventually going to offset the new buying that takes place. But Nikkei downside is likely to be less pronounced... with more investors - including the government - standing ready to buy on the dip," he told Dow Jones Newswires.

The dollar, which on Monday rose above 114 yen for the first time since late 2007, stood at 113.57 yen early Wednesday in Tokyo, compared with 113.63 yen in New York Tuesday. The euro was at 142.61 yen against 142.55 yen in US trade.

The euro was also at US$1.2557 against US$1.2545 despite the European Commission's decision to cut its eurozone 2014 growth forecast to 0.8 per cent from 1.2, and its 2015 estimate to 1.1 per cent from 1.7 per cent.

Focus is now on the European Central Bank's next policy meeting later this week, with analysts looking for some guidance on its plans for kick-starting the economy.

US shares ended broadly lower after the Commerce Department said new orders for manufactured goods fell and the trade deficit widened.

Analysts also said last week's initial estimate of growth in the third quarter, which came in at 3.5 per cent, was likely overstated by as much as 0.4 percentage points, and that the current quarter would be slower.

The Dow edged up 0.09 per cent, the S&P 500 dropped 0.29 per cent and the Nasdaq slipped 0.33 per cent.

On oil markets US benchmark West Texas Intermediate (WTI) for December delivery rose 17 US cents to US$77.36 while Brent crude for December fell six US cents to US$82.76.

The price of gold was US$1,168.60 an ounce from US$1,169.98 late Tuesday.

AFP