Tokyo: Asian stocks fell back from recent five-month highs on Friday, hit by profit-taking fed by renewed worries over the global recovery, while the yen clung close to its highest since Japan’s currency intervention last week.
The spectre of more monetary easing by the Federal Reserve and falling US yields put renewed pressure on the dollar, while the euro also slipped as fresh worries about Ireland’s economy and banks raised more doubts about the euro zone’s prospects.
But Asian shares ex-Japan appeared poised for their strongest monthly performance in roughly a year, while even Japan’s Nikkei average -- a global laggard -- is seen likely to have its best monthly performance in six months, bolstered by a renewed interest in the region that has sent funds flowing its way.
“I think many market players are looking for chances to book profits if there is any rebound,” said Kiyoshi Noda, chief fund manager for MU Investments in Tokyo.
“There are persistent concerns about the US economy, and unless that situation improves it is hard to think that there will be a big shift in the overall trend.”
US shares slumped on Thursday, hit by a worse-than-expected rise in initial unemployment claims and a sluggish rise in sales of previously owned homes, with the S&P 500 falling below a key technical level to support the views of those who had thought the recent rally was flimsy.
The malaise continued in Asia, with the MSCI index of Asia-Pacific shares ex-Japan down 0.4%, falling back from a five-month high touched earlier this week, with materials and tech shares taking some of the biggest hits.
Markets in China, Japan, Hong Kong and South Korea were closed on Thursday. Japan’s benchmark Nikkei shed 1.3% to 9,446.71.
Shares of Japanese companies with strong exposure to China, such as Komatsu and Hitachi Construction Machinery, remained under pressure as a row between Japan and China over ownership of islets in the East China Sea dragged on. Australian shares lost 0.8%
But according to EPFR Global data, Asia ex-Japan Equity Funds had their best week in over 15 months in the week ending 22 September, while Japan Equity Funds snapped a 12-week outflow streak.
The run was due, it said, to strong regional growth and the generally good fiscal profile of key markets.
The MSCI world stock index slipped 0.2%.
The dollar traded at ¥84.52, up 0.2% from late US levels, but not far from the post-intervention low of 84.26 hit on Thursday, and market players remained on guard about the chance of more such action.
“There hasn’t been any intervention even after the dollar fell below 85 yen, which some in the market have thought could be the line in the sand. That may lead to speculation that Japan’s real defence line is around 82-83 yen,” said Keiji Matsumoto, a strategist at Nikko Cordial Securities.
”Nonetheless, many market players will remain wary of intervention for now after their huge intervention.”
Japan intervened on 15 September minutes after the dollar hit a 15-year low of 82.87 yen, selling an estimated ¥2 trillion ($23.70 billion), its largest single-day yen selling intervention. Also pressuring the dollar are shrinking yield gaps between the dollar and the yen.
The two-year bond yield spread fell to around 29 basis points, the lowest in nearly two years, as expectations that the Federal Reserve will adopt quantitative easing brought US bond yields closer to Japanese yields.
Spot gold held steady and was heading for a 1.5% rise from a week earlier.