Asia stocks ease on nagging U.S. economy worries
Asian shares retreated from seven-months highs on Thursday as concerns grew that rising yields on U.S. government debt could push up borrowing costs and choke off a potential recovery in the world's largest economy.
U.S. home sales picked up in April, but the positive sign was outweighed by worries that the U.S. government was incurring too much debt as it tries to spend its way out of recession, sending Treasury prices falling along with stocks.
The benchmark 10-year Japanese government bond's yield hit a six-month high in early Asia trade after U.S. Treasury debt prices came under heavy pressure on supply concerns.
The accompanying rise in bond yields raised worries about a U.S. economic recovery as this would lead to increased borrowing costs for consumers and corporations.
Underscoring the intense pressure on government finances, New Zealand unveiled its biggest fiscal deficit in 25 years and forecast up to 10 years of deficits and rising debt in a budget aimed at supporting the economy while averting a credit downgrade.
The Kiwi dollar fell 0.3 percent to $0.6133, after hitting a 7-month high of $0.6262 on Tuesday.
Investors also remained cautious as General Motors Corp
Though the chances of General Motors going into Chapter 11 are quite high, the market is currently watching the long-term direction of the economy even more, said Masayoshi Yano, senior market analyst at Meiwa Securities in Tokyo.
Asian stocks gained on Wednesday after a jump in U.S. consumer confidence reinforced expectations the global economy has hit a bottom. Consumer spending accounts for roughly two-thirds of the U.S. economy, so the news was a positive signal for global trade including for Asian exporters.
The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> had shed 0.7 percent as of 0200 GMT, after ending Wednesday trade at its highest level since last October when markets were tumbling in the wake of the collapse of Lehman Brothers.
Japan's Nikkei average <.N225> took a breather and dipped 0.1 percent after breaking above a key resistance level, its 200-day moving average, the previous day.
Data has shown that Japan's exports showed modest signs of recovery in April, providing another sign that the slump in global trade may have bottomed.
Elsewhere in Asia, Hong Kong and Chinese markets were closed on Thursday for the Dragon Boat Festival holiday. The main indexes in South Korea <.KS11> fell 0.6 percent.
CURRENCIES
The dollar held steady against the euro, having pulled up from five-month lows hit against the single European currency last week due to short-covering.
Investors tend to move funds out of the dollar and into riskier assets when they become more optimistic about the outlook for the U.S. and global economy, but they probably still lack conviction about a recovery, said a trader for a Japanese trust bank.
People's views are mixed, there is both optimism and pessimism, the trader said.
The euro rose 0.1 percent from late U.S. trading on Wednesday to $1.3844, having pulled back from a five-month high of $1.4051 hit on trading platform EBS last week.
The dollar rose 0.6 percent against the yen to 95.90 yen.
The dollar hit a five-month low against a basket of major currencies last week, after a warning from Standard & Poor's that Britain's triple-A credit rating could be cut stoked worries the debt of the world's reserve currency may face the same fate.
But Moody's Investors Service affirmed its top credit rating for the United States on Wednesday, ruling out any changes in the foreseeable future.
The Australian dollar regained some ground after slipping on Wednesday. Higher-yielding currencies such as the Aussie and kiwi dollars usually benefit when risk appetite increases.
The Australian dollar rose 0.5 percent to $0.7796, but had pulled back from Wednesday's high of $0.7893, which was the highest in almost eight months.
JGB futures fell 0.29 point to 136.07 after dipping as low as 136.03, their lowest since Oct 22. Benchmark 10-yr yields inched up 2 bps to 1.490 percent.
Crude prices fell 48 cents to below $63 a barrel on concerns that a U.S. economic recovery could be delayed. Oil hit a six-month high near $64 a barrel on Wednesday after Saudi Arabia, OPEC's biggest member, said the global economy had strengthened enough to cope with oil at $75 to $80 a barrel.
Oil has rallied since its lows in December below $33 a barrel.
(Editing by Kim Coghill)
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