Asian shares step back as investors ponder stimulus outlook

Pedestrians are reflected in the window of a securities company in Tokyo on July 1.
Pedestrians are reflected in the window of a securities company in Tokyo on July 1.PHOTO: AFP

TOKYO (REUTERS) - Asian shares stepped back after five straight days of gains on Tuesday (July 5) as investors took stock of a rally driven by the hope that central banks will provide stimulus to offset a likely downturn triggered by Brexit.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 per cent, but was still within reach of its June 9 peak, having risen more than 6 per cent from its low after the Brexit vote.

Japan's Nikkei dropped 0.5 per cent. Financial and commodities markets in the United States were closed on Monday for Independence Day.

In Europe, the FTSEurofirst 300 index fell 0.6 per cent, snapping its four-day winning streak, led by a 1.6 per cent decline in bank shares.

Shares in Italian banks, saddled with a mountain of bad loans, dropped 3.7 per cent after Italian Prime Minister Matteo Renzi's spokesman said the country had no plans to pump public money into its banks, a move that could be seen as defying EU rules.

Overnight the price of precious and base metals hit multi-month highs before giving up gains as traders bet on more stimulus.

Silver held on to its big gains over the past few sessions to trade at US$20.35 per ounce. It has risen 11.5 per cent in the three sessions to Monday. Gold also hit a two-year high of US$1,357.40 per ounce and last stood at US$1,350.

The price of copper and aluminium hit two-month highs while lead hit a five-month peak.

"Various commodities are rising even though there is no clear sign of sudden improvement in demand in each market. Their rally seems to be driven by hopes of stimulus," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The Bank of England has indicated it could take provide stimulus measures to support the economy in coming months.

Many investors also expect the European Central Bank and the Bank of Japan could expand their monetary easing. Base metal prices were also bolstered by talk of stimulus in China.

In the currency market, the euro firmed to US$1.1149, maintaining its recovery from 3 1/2-month low of US$1.0912 hit in the wake of the UK referendum.

The yen stood at 102.56 to the dollar, so far little changed on the week.

The Australian dollar shrugged off political uncertainty caused by Australia's undecided general election to rise to US$0.7535, its highest level since June 24, helped by rise in commodities.

The Australian central bank is widely expected to keep interest rates at its policy announcement at 0430 GMT.

While many currencies recovered from their post-Brexit lows, the pound remained lacklustre, staying near its 31-year trough.

Sterling fetched US$1.3282, just one per cent above its June 27 low of US$1.3122.