Reuters: US Dollar Report: GLOBAL MARKETS-Dollar, stocks slip on Fed stimulus uncertainty

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GLOBAL MARKETS-Dollar, stocks slip on Fed stimulus uncertainty Aug 15th 2013, 04:07 Thu Aug 15, 2013 12:07am EDT * Dollar drops as Japan ministers quash corporate tax-cut hopes * Nikkei skids 1.7 pct, moving away from one-week closing high * Euro buoyed as data confirms 18-month euro zone recession over By Lisa Twaronite TOKYO, Aug 15 (Reuters) - Asian stocks got off to a weak start on Thursday, as uncertainty over when the U.S. Federal Reserve may start to pare back its stimulus offset any cheer from a brighter economic picture in Europe. The dollar was also on the defensive, with a lack of clarity about the Fed's stimulus plans in the coming months, as well as comments from Japanese ministers shooting down a media report earlier this week that the government is considering cuts in corporate tax. The greenback sank about 0.4 percent against the Japanese currency to 97.65 yen, while the euro fell 0.2 percent to buy 129.86 yen. The stronger yen and fading tax-cut hopes pressured Tokyo's Nikkei stock average, which fell 1.7 percent, off a one-week closing high hit on Wednesday. Thin summer conditions amplified moves, market participants said. "Due to thin trade, we need to brace for unpredictable moves in late trade such as leveraged ETF trade and futures trade by program traders," said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities. Japanese government spokesman Yoshihide Suga and Finance Minister Taro Aso both downplayed this week's report in the Nikkei business daily that the government is considering lowering the corporate tax. Aso said such cuts would not have an immediate impact on the economy. MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 percent. Against a basket of major currencies, the dollar fell about 0.3 percent as the euro rose about 0.3 percent to $1.3265 . Data on Wednesday showed that the economies of Germany and France grew more quickly than expected in the second quarter, pulling the euro zone out of an 18-month recession. The yield on benchmark 10-year Treasury notes edged away from nearly two-year highs hit earlier this week. A selloff of U.S. Treasuries on Monday and Tuesday saw yields post their biggest two-day increase since early July on speculation that signs of U.S. and European economic growth might lead the Fed to taper its $85 billion-a-month in asset purchases as early as September. A Reuters poll on Wednesday showed a majority of economists expect the Fed to reduce bond purchases at its Sept. 17-18 policy meeting. "The market is getting nervous about tapering. I expect that to happen in September and the dollar to start rising then. But it is likely to go through some adjustment before that as there are concerns that tapering could spark risk-off trading as it did in May-June," said Hideki Amikura, forex manager at Nomura Trust and Banking. Recent U.S. data sent mixed signals on the strength of the economic recovery, and comments from Fed officials fell short of clarifying the bank's policy outlook. St. Louis Federal Reserve President James Bullard said on Wednesday that the Fed risks pushing inflation even lower if it tapers bond purchases too aggressively, and could take a more cautious approach by initially only scaling back by a small amount. U.S. producer prices were flat in July, data on Wednesday showed, suggesting domestic inflation will likely stay below the Fed's 2 percent target for the foreseeable future. Data on Thursday will include the July consumer price index, industrial production, jobless claims for the most recent week and a U.S. mid-Atlantic business survey. In commodities markets, copper slipped 0.3 percent to $7,296.50, moving away from a nine-week high hit on Tuesday. Gold slipped to $1,339.89 per ounce. Brent crude prices rose 0.4 percent to $110.62 a barrel, extending gains from the previous session on a drop in U.S. oil inventories. Investors also feared unrest in Egypt could choke key supply routes or spill over into key oil producing nations. Link this Share this Digg this Email Reprints

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