Asian shares slump as Yellen awaited, STI down 0.3%

Pedestrians are reflected on an electric quotation board displaying the Nikkei key index of the Tokyo Stock Exchange on March 17, 2016.
Pedestrians are reflected on an electric quotation board displaying the Nikkei key index of the Tokyo Stock Exchange on March 17, 2016.PHOTO: AFP

TOKYO (REUTERS) - Asian shares struggled to find their footing on Tuesday (March 29) and the dollar clawed back ground lost after downbeat US economic data contributed to an uninspiring session on Wall Street.

Investors awaited Federal Reserve Chair Janet Yellen's speech at 11:20pm Singapore time for fresh signals on the outlook for US interest rate hikes, after a chorus of hawkish comments from other Fed officials.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped about 0.4 per cent after wavering for most of the early session.

Australian shares shed 1.4 per cent, in their first day of trade following the long Easter weekend that also closed markets in many European countries.

Japan's Nikkei skidded 0.5 per cent as the Japanese fiscal year draws to a close at the end of this month, with the mood not helped by mixed economic data released before the market opened.

Singapore's Straits Times Index was down 0.31 per cent at 2,821.54 as of 12:19pm.

"The selling that we're seeing this morning has been pretty tepid," said Nicholas Smith, a strategist at CLSA.

Japanese household spending rose 1.2 per cent in February from a year earlier in price-adjusted real terms, in contrast with the median forecast for a 1.5 per cent fall, partly because of the extra Leap Year day. But the country's jobless rate inched up to 3.3 per cent, and retail sales fell short.

US data released on Monday also showed signs of weakness, with consumer spending barely rising last month and inflation retreating. That suggested the Federal Reserve could remain cautious about raising interest rates this year even as the labour market rapidly tightens.

Against the yen, the dollar was steady at 113.49 yen, though below its overnight high of 113.69. The euro was also steady at US$1.1197.

The dollar index, which tracks the US currency against a basket of rivals, was nearly flat at 95.976, below Monday's nearly two-week high of 96.399.

Speculation of more monetary stimulus and talk that Japanese Prime Minister Shinzo Abe might delay an unpopular sales tax hike and call a snap election kept the yen under pressure, though Abe insisted on Tuesday that neither option was planned.

Despite the divergence in monetary policy expectations, with the Fed still seen on track to hike rates this year and the Bank of Japan expected to take additional stimulus steps, the yen remained hamstrung by uncertainty over whether the BOJ will cut interest rates deeper into negative territory.

"We're still experiencing the hangover from the BOJ's negative interest rate policy, which is driving a lot of safe-haven flows," said Jennifer Vail, head of fixed-income research at US Bank Wealth Management. "The market is waiting to see if a further move into negative territory is going to be part of policymakers'toolbox," she said.

Crude oil extended overnight losses. Brent was down 0.7 per cent at US$40.01 a barrel, while US crude fell 0.6 per cent to US$39.16.

Gold dipped slightly on Tuesday, but held above a one-month low on a softer dollar and weak US economic data that dented expectations of an immediate hike in US interest rates.

Spot gold was down 0.2 per cent at US$1,218.70 an ounce, holding above a one-month low as the weak US data dented expectations of an immediate hike to US interest rates.