Earnings taking weighs on Asia stocks, dollar holds gains

© Reuters. A man walks past a screen displaying the Nikkei average outside a brokerage in Tokyo

By Shinichi Saoshiro TOKYO (Reuters) – Profit taking weighed on Asian stocks on Wednesday after a record work on Wall Street revealed indications of petering out, while the dollar hovered near a four-month high versus a basket of currencies following upbeat U.S. information. Investors’ risk appetite, which has recovered quickly from the Brexit shock late in June, got a sobering suggestion after the International Monetary Fund cut its international growth forecasts for the next 2 years on Tuesday, mentioning unpredictability over Britain’s looming exit from the European Union. Spreadbetters also saw a subdued start for European stocks, forecasting a slightly higher open for Britain’s FTSE (), a marginally lower start for Germany’s DAX () and France’s CAC () to open flat. MSCI’s broadest index of Asia-Pacific shares outside Japan () edged up 0.2 percent, having reached its highest in almost nine months last week. Shares rose in Hong Kong, Australia, India and much of Southeast Asia, however retreated in South Korea and China. Japan’s Nikkei () fell 0.3 percent, on track for its first decline in seven days. “Although the market is taking a break from a long rally amid a lack of fresh drivers to buy, investors may chase the marketplace greater depending upon central bank events next week,” stated Takuya Takahashi, a strategist at Daiwa Securities in Tokyo. The S&P 500 () pulled back from record highs on Tuesday, while the Dow () edged up for a 8th straight day of gains, as investors contemplated combined profits reports and a gloomier international outlook. () The stood at 97.054 (), after touching a four-month peak of 97.158. Tuesday’s stronger-than-expected June U.S. housing begins data has offered the dollar a lift. “The United States dollar is proving to be a huge winner in a duration when central banks around the world are talking about relieving,” wrote Kathy Lien, handling director of FX technique for BK Possession Management. “That leaves the Federal Reserve and the Bank of Canada as the lone soldiers standing ground on stable policy. We have not seen substantial strength in the Canadian dollar, partly due to the fact that oil prices have actually been falling however the U.S. dollar is seeing good momentum.” The dollar traded at 106.055 yen after touching a one-month high of 106.53 overnight. Expectations that the Bank of Japan would reduce monetary policy later this month have actually weighed on the yen. The euro was stable at $1.1016 after slipping to a three-week trough of $1.1000. The Australian dollar was almost flat at $0.7503 after falling 1.1 percent on Tuesday, when it was dragged down by a New Zealand dollar compromised by growing speculation that the country’s reserve bank it will cut rates in August. Fed funds futures rates show investors see almost a 50/50 possibility that the U.S. reserve bank will raise rate of interest by its December meeting, according to CME Group’s FedWatch tool, compared with less than 20 percent a couple of weeks back. Geopolitical threats also loomed as a factor for markets. The Turkish lira came under renewed pressure and fell to its lowest level given that last September amidst reports of an expanding purge in Turkey after an abortive coup last week. According to a BofA Merrill Lynch fund supervisors’ study, financiers saw geopolitical risk as the most significant risk to monetary market stability, followed by threats of protectionism. Petroleum costs bounced modestly after falling more than 1 percent on Tuesday, when a rallying dollar and an international fuel excess balanced out forecasts for lower stockpiles. Brent () was up 0.3 percent at $46.81 a barrel. [O/R] Profit taking nudged nickel far from a 10-month high reached over night amid persistent concerns over a Philippines mining crackdown. Zinc edged approximately a 14-month peak on concerns over falling mine output. [MET/L]

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