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GLOBAL MARKETS-Asia shares edge back towards highs, dlr dips

Published 07/29/2010, 02:37 AM
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* European shares likely to open flat to lower

* Asian shares edge back towards nearly 3-month high

* Dollar slips on weak U.S. durable goods orders

* Kiwi struggles, hurt by RBNZ statement on future hikes

By Elaine Lies

TOKYO, July 29 (Reuters) - Asian stocks edged back up towards a three-month high and the dollar eased towards three-month lows on Thursday, hit by soft U.S. data that highlighted the patchy nature of the U.S. economic recovery.

An unexpected drop in U.S. June durable goods orders and a downbeat Federal Reserve take on the economy were the latest in a string of lacklustre indicators to suggest that the U.S. economy is losing steam, broadly dampening investor sentiment.

European shares were expected to open little changed to lower as investors waited for more company earnings results and a raft of euro zone economic data, including readings on consumer and business sentiment.

Traders said a recent move back into riskier assets had cooled after the Fed's Beige Book of anecdotal reports pointed to a less-than-booming U.S. recovery, with sluggish housing markets and sales of costly items such as new cars weakening.

"Shares are taking a breather today as weak U.S. economic data is weighing on sentiment, especially towards technology exporters," said Lee Jin-woo, a market analyst at Mirae Asset Securities.

Asian shares dipped in early trade before edging back up toward levels hit the day before, when they marked their highest since May 5. Materials and consumer discretionary shares saw solid buying interest.

The MSCI index of Asia Pacific shares ex-Japan clawed up 0.1 percent, with Shanghai and Taiwan shares gaining modestly while Australian shares were flat.

Japan's Nikkei average lost 0.6 percent to 9,696.02 as investors took profits after a rally that had lifted the benchmark to a two-week closing high on Wednesday

Panasonic Corp tumbled 7.7 percent after sources told Reuters it plans to acquire the shares it does not already own in Sanyo Electric Co and Panasonic Electric Works Co Ltd Sanyo shares soared more than 26 percent at one point.

Attention is now turning to U.S. jobless claims later in the day and U.S. second quarter GDP on Friday, with analysts saying it was difficult to predict longer-term market direction until these reports, and non-farm payrolls next week, come out.

"I don't think shares are set for a rally, unless these indicators show the economy is improving," said Hiroaki Osakabe, fund manager at Chibagin Asset Management in Tokyo.

"In Japan's case, poor indicators may keep the yen strong (as investors seek safe havens) and that will make it very hard for the Nikkei to rise."

A Reuters poll showed annual U.S. growth in the second quarter was expected to slow to 2.5 percent from 2.7 percent in the first quarter amid a cooling in consumer demand, and a recent flurry of weak data suggest it lost more momentum heading into summer.

KIWI STRUGGLES, DOLLAR SOFT

The New Zealand dollar fell sharply after the Reserve Bank of Zealand signalled the pace of further interest rate hikes would be less than earlier thought, though it later staged a mild recovery.

The central bank lifted interest rates by a quarter point on Thursday, as widely expected, but said further hikes would probably be more gradual because of a deteriorating outlook for the country's main trading partners and subdued domestic demand.

The kiwi fell to as low as $0.7207, from $0.7280 before the announcement, before staging a mild recovery.

"The neutral statement and revised market expectations for future rate decisions will help in taking upside pressure off the kiwi," said Josh Williamson, an analyst at Citi.

The dollar index against a basket of major currencies was down 0.2 percent at 81.990 after the weak U.S. data, with near-term support at 81.44, the 50 percent retracement of the index's move from a low of 74.17 in December 2009 to a high of 88.71 on June 7.

The greenback also lost ground against the yen edging down 0.3 percent to 87.23 yen.

The euro consolidated near $1.30, holding near 11-week highs against the dollar as concerns shifted from Europe's debt crisis to the uneven U.S. economy.

But gold rebounded, although gains could be limited after holdings in the world's largest gold-backed ETF (exchange-traded fund) SPDR Gold Trust dropped to their weakest since June.

Spot gold rose to $1,166.50 an ounce by 0600 GMT after falling as low as $1,156.90 on Wednesday, its weakest since late April.

U.S. crude futures were littled changed at just over $77 a barrel after falling for a second session overnight on a suprise build in U.S. crude oil inventories. (Additional reporting by Jungyoun Park and Anirban Nag; Editing by Kim Coghill)

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