GLOBAL MARKETS-Japanese stocks lead Asia lower as yen firms
* Nikkei plumbs four-week lows, other Asian markets also softer
* Yen rises to one-month high vs broadly weaker dollar
* Tentative gains seen for European stocks at open
* Plenty of hurdles this week, not least Fed meeting
By Ian Chua
SYDNEY, July 29 (Reuters) - The yen rose to a one-month high against the dollar on Monday as investors braced for another round of disappointing economic news out of China, knocking Japanese stocks to four-week lows and dragging down regional markets.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.6 percent, giving back a chunk of last week's 1.9 percent gain.
Tokyo's Nikkei share average slid 3.3 percent to its lowest close this month, and has now lost more than 7 percent in three days.
Traders said there were concerns that manufacturing surveys later this week would point to more weakness in China, Asia's economic powerhouse and a major trading partner for countries throughout the region.
"A sense of caution is looming in the market, especially because investors are worried about a slowdown in the Chinese economy. And when they see a risk in Asia, they tend to buy the yen, and the Japanese market is hit by that," said Kyoya Okazawa, head of global equities at BNP Paribas.
Adding to the uncertainty were signs that a planned increase in the sales tax -- Japan's most significant fiscal reform in years and seen as a test of government resolve to fix its finances -- could be delayed or watered down.
"Foreign investors expect Japan to raise its sales tax rate to 8 percent next April and this has supported the market for some time now," said Kenichi Hirano, a strategist at Tachibana Securities.
"If this plan doesn't go through as expected, it could result in a huge sell-off in yen and Japanese stocks. Even a change or a delay in the plan would have negative effects on the markets."
Despite the fall in Asian bourses, financial spreadbetters are calling for European markets to open slightly higher, partly supported by hopes the Federal Reserve, European Central Bank and Bank of England will this week offer reassurances that their monetary policies will remain accommodative for a long time.
All three central banks hold their respective meetings later in the week.
The yen strengthened to a one-month high around 97.64 per dollar, having been weaker than 100 per dollar as recently as last Thursday, while the euro fell back below 130.00 yen to two-week lows.
Against the dollar, the euro was little changed at $1.3280 , having stalled for a third day just under $1.33. That helped the dollar index edge off a five-week trough hit earlier in the day.
Still, expectations that the Fed will maintain its pledge to keep policy loose even if it is to begin tapering stimulus in coming months should keep the dollar pinned down, analysts said.
"The Fed is likely to reiterate that while it is considering tapering its monetary stimulus later this year, it is conditional on stronger economic growth and that interest rate hikes are still a long way off," said Shane Oliver, head of investment strategy at AMP Capital.
Oliver said the Fed might even consider adjusting its policy guidance to emphasise there will be no imminent tightening.
"The Fed's assessment of recent mixed data will clearly be watched as a guide to whether the start of tapering will be delayed beyond the September meeting, which was initially the consensus favourite as to when it would begin."
Worries about China kept commodities under pressure, although the soft dollar helped limit their losses.
Copper reached three-week lows around $6,820 a tonne, while U.S. crude eased 0.5 percent to $104.14 a barrel, staying within sight of a three-week trough of $103.90 hit on Friday.
Gold was a touch softer following a 3 percent rally last week. It stood around $1,327 an ounce, off a five-week peak of $1,347.69 hit last Tuesday.
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