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Sep 18, 2012, 10.26 AM IST
Asian shares retreated from four-month highs on Tuesday while gold and copper eased, as markets calculated the impact on growth from the Federal Reserve's aggressive stimulus and eyed whether Spain will request a bailout to ease its fiscal strains.
Concerns about the growth slowdown in China, the world's top consumer of raw materials and the second-largest economy, also weighed on sentiment as investors took profits from last week's rallies.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4%. The index touched its highest point since May 3 on Monday, rallying some 3% since the Fed launched a third round of bond buying known as quantitative easing (QE) on Thursday, spurring a broad based jump in riskier assets.
European shares slipped from 14-month highs on Monday as traders booked profits while US stocks also paused after surging nearly five-year highs last week.
Commodity-reliant Australian shares fell 0.2% while Shanghai shares dropped 0.5% on Tuesday.
"Investors are really in defensive mode today, and probably will stay that way until Thursday, when we get the fresh read on manufacturing out from China," said Juliana Roadley, a market analyst at Commonwealth Securities, referring to the HSBC flash PMI.
Reflecting how the country's resources sector is losing steam as slackening demand from top customer China drove down commodity prices, Australia on Tuesday revised down minerals and energy export revenues by 9% to A$190 billion in the year to June 30, 2013. It also cut its revenue forecasts for iron ore by a fifth.
The Nikkei stock average bucked the trend to edge up 0.2%, with a weaker yen offsetting concerns over firms having large exposure to China, where anti-Japan protests were escalating as tensions mounted over a territorial dispute between Asia's two biggest economies.
Masayuki Doshida, senior market analyst at Rakuten Securities, said the Japanese stock market was also underpinned by expectations that the Bank of Japan will follow the Fed with its own stimulus measures, to stem the yen's appreciation after the Fed's move last week. The BOJ ends its two-day policy meeting on Wednesday.
The yen traded at 78.59 to the dollar, off a one-week low of 78.93 touched on Monday. The Fed's move undermined the dollar and lifted the yen to a seven-month high of 77.13 on Thursday.
The dollar index measured against a basket of key currencies stayed near Friday's 6-1/2 month low of 78.601.
The euro eased 0.1% to USD 1.3102, slipping from a 4-1/2 month high of USD 1.31729 hit on Monday.
"A pause in post-QE3 euphoria saw major asset classes pare recent advances. Lingering concern at Spain's brave fiscal face, geopolitical tension in the Middle East and in China/Japan, and a disappointing NY regional manufacturing report all weighed on sentiment," said Sean Callow, senior currency strategist at Westpac in Sydney, in a research note.
Oil rose, with US crude oil futures and Brent futures both up 0.4% to USD 96.97 a barrel and USD 114.20 respectively. A sudden slide in oil on Monday triggered selling across commodities, although the cause of the drop was unclear.
Copper fell 0.2% to USD 8,285 a tonne.
Spot gold fell 0.2% to USD 1,756.64 an ounce, below a 6-1/2-month high of USD 1,777.51 hit on Friday.
"Gold has been rising steadily so it's natural that profit taking takes place in the short term," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo.
But over the longer term, the Fed's accommodative stance will stoke inflation fears and undervalue the dollar and bolster gold's appeal as a hedge against these factors, he said, adding that he expected firm support at USD 1,730, with markets likely to test last year's peak above $1,900 before the end of the year.
Asian credit markets were a touch softer, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 2 basis points but still near a 14-month low.
Yields on 10-year Spanish bonds rose back above 6 percent on Monday amid uncertainty over if and when Madrid will formally seek financial aid needed to trigger European Central Bank bond buying.
The ECB could cut its main interest rate, put its deposit rate into negative territory and offer banks a new round of ultra-cheap funding, policymaker Luc Coene said on Monday, adding Spain's borrowing costs would soar again without support.
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