GLOBAL MARKETS-Asian stocks slip, yen rises in holiday-hit trade

Fri Jan 31, 2014 2:09am EST

* Lunar New Year holiday closures curb activity
    * MSCI Asia-Pacific index gives up struggle to stay positive
    * Dollar loses grip on gains on resurgent yen

    By Lisa Twaronite
    TOKYO, Jan 31 (Reuters) - Asian stocks slipped on Friday, as
fears about the impact of the Federal Reserve's stimulus
withdrawal on emerging markets offset the reassurance of upbeat
U.S. growth data.
    European bourses were expected to start the session on the
defensive. Capital Spreads predicted Britain's FTSE 100 
would open 18 points lower, or 0.3 percent; Germany's DAX
 to fall 15 points, or 0.2 percent; and France's CAC 40
 to open flat.
    "European markets look set to end the first month of 2014 on
the back foot as worries about emerging market economies, the
Fed tapering programme and a slowdown in China continue to act
as a weight on risk appetite," Michael Hewson senior analyst at
CMC Markets, said in a note to clients.
    With several countries, including Hong Kong and Singapore,
observing the Lunar New Year holiday, Asian activity was lighter
than usual.    
    MSCI's broadest index of Asia-Pacific shares outside Japan
 fell 0.1 percent after earlier wavering between
positive and negative territory, on track for a monthly loss of
around 5 percent. 
    Japan's Nikkei stock average reversed sharply and
ended down 0.6 percent as a resurgent yen took a toll on
exporter shares. The index shed 7.8 percent for the week and 8.5
percent for the month. 
    Japanese data released early on Friday initially cheered
investors, with the country's core consumer inflation rising at
the fastest pace in more than five years in December, the job
market improving and factory output growing. 
    But the upbeat data also had its downside for market
participants hoping for more easing steps from the Bank of
Japan. 
    "I think the BOJ is unlikely to adopt additional easing
because there is no reason to justify it, given the positive
macro-economic environment," said Junko Nishioka, chief
economist at RBS Securities.
    S&P 500 e-mini futures were nearly flat on the day
after initially climbing after Wall Street gains, as U.S.
investors took heart from Thursday's data showing U.S. gross
domestic product grew at a 3.2 percent annualised pace in the
fourth quarter of 2013 to round out the biggest half-year
increase since 2003. 
    "I think the impact of emerging markets on G10 currencies
will diminish and the market's focus will return to the strength
of the U.S. economy," said Koichi Takamatsu, head of forex
trading at Nomura Securities in Tokyo.
    But the yen's recovery on Friday afternoon showed that in
the short-term, at least, the Japanese currency retains some of
its safe-haven appeal.
    The dollar slipped about 0.2 percent against the yen 
to 102.51 yen after dropping as low as 102.33 yen. It remained
above a seven-week low of 101.77 yen hit on Monday. 
    The euro gave up its earlier gains against the Japanese
currency and slipped about 0.3 percent against the yen to 138.80
yen, after falling as low as 138.68 yen, its lowest
since Dec. 5.
    The U.S. dollar index was nearly flat on the day at 81.101
 but remained close to a one-week high against a basket of
major currencies hit on Thursday, when it rose as far as 81.135
from a session low of 80.545.
    The upbeat U.S. growth data helped calm markets roiled by
anxiety over emerging economies, but it also validated the Fed's
decision to stick to its tapering plan. 
    The Fed decided this week to stay the course on its stimulus
withdrawal and reduced its bond purchases for a second time, to
$65 billion per month from $75 billion as expected, reviving
perennial concerns that capital will flow out of emerging
markets.
    Several emerging market central banks, including Turkey,
South Africa and India, implemented extraordinary interest rate
hikes this week in an effort to stem selling of their
currencies. Russia's central bank pledged unlimited foreign
exchange intervention if the rouble strays outside its target
band.             
 
    On the commodities front, spot gold was nearly flat
at $1,243.00 an ounce, on the heels of a 2-percent overnight
fall.  
    U.S. oil edged 0.4 percent lower to $97.80 a barrel.
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