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Asian shares steady, rising US yields bolster dollar

LiveMint logoLiveMint 04-06-2014 Lisa Twaronite

Tokyo: Asian shares were steady on Wednesday and the dollar benefited from rising US Treasury yields, while the euro remained under pressure ahead of expected easing steps from the European Central Bank (ECB).

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat in early trade, not far from last week’s one-year high.

Japan’s Nikkei stock average rose 0.1%, getting a lift from a weaker yen, and building on Tuesday’s 2-month closing high.

On Wall Street overnight, shares edged lower but remained close to multi-year highs, with the benchmark S&P 500 ending less than a point off Monday’s record close, and helping to push benchmark US yields to three-week highs.

The yield on 10-year notes was at 2.5%, steady from its US close of 2.5%, and well above last week’s 11-month lows.

US economic data on Tuesday showed new orders for factory goods rose for a third straight month in April and automakers recorded solid vehicle sales in May, adding more evidence to back market expectations of an improved second quarter performance.

US jobs data on Friday could help determine whether the rise in yields will continue. The US nonfarm payrolls report for May is expected to show that employers added 218,000 jobs, according to the median estimate of 105 economists polled by Reuters.

“Friday’s payrolls will provide an important test of whether the rise in US yields and the dollar can be sustained,” strategists at Barclays wrote in a note to clients.

“Equities have been resilient in the face of higher core yields due in part to stronger manufacturing output,” they said. “Meanwhile, more signs of a bounce in China’s growth, coupled with signals of further targeted monetary easing have helped Chinese equities reverse most of the losses since April.”

The rise in yields helped the dollar reach a one-month high against the yen at 102.59. It was last up about 0.1% at ¥102.56.

The dollar index, which tracks the greenback against a basket of six major rivals, edged up slightly on the day to 80.582, not far from Monday’s high of 80.681, which was its best level since mid-February.

The euro edged down about 0.1% to $1.3618, and remained not far from a four-month low of $1.3585 touched on Monday. Against its Japanese counterpart, the euro slipped modestly to ¥139.64, moving back toward a four-month low of ¥137.98 hit on Thursday.

Reuters reported last month that the ECB is preparing a package of policy easing options for its meeting on Thursday that includes interest rate cuts.

Euro zone inflation data on Monday gave the ECB more evidence that steps are needed, as the inflation rate unexpectedly fell to 0.5% in May from 0.7% in April. Economists polled by Reuters had expected inflation to remain steady. Reuters

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