* U.S. stocks, bonds slip as Fed stops short of more dovish
* Tapering remains data-dependent, market still betting on
* Asian shares down only modestly, impact seen short-lived
* BOJ reaffirms commitment to stimulus at meeting, amid
By Wayne Cole
SYDNEY, Oct 31 Asian markets suffered a glancing
blow on Thursday after the U.S. Federal Reserve's latest policy
outlook was deemed less dovish than some had wagered on, lifting
both bond yields and the dollar.
The damage was mostly superficial with MSCI's index of
Asia-Pacific shares outside Japan off just 0.3
percent. Shares in Shanghai lost 0.7 percent while
Japan's Nikkei eased 0.4 percent.
Helping sentiment was the Bank of Japan's decision to stick
with its massive stimulus program that has shown tentative signs
of breaking the grip of deflation.
Indeed, a survey of Japanese manufacturing out on Thursday
showed activity accelerated to its fastest in more than three
years in September
There was also upbeat news from Australia where approvals to
build new homes surged to their highest since early 2010,
concrete evidence that record-low interest rates were working to
support economic growth.
These factors helped lessen the drag from Wall Street, which
had slipped after the U.S. central bank kept its $85
billion-a-month stimulus plan intact but did not sound quite as
alarmed about the state of the economy as some had anticipated.
Given U.S. shares had reached record highs this week, the
resulting profit-taking came as no surprise.
The Dow Jones industrial average fell 0.39 percent
and the S&P 500 lost 0.49 percent. The MSCI world equity
index showed even less damage, easing just 0.1
percent from a high not seen since January 2008.
Dealers said the market had talked itself into expecting the
Fed would make dovish changes to the statement, so it was
somehow considered "hawkish" when those did not materialise.
"We interpreted the statement as neutral and balanced and
think the Fed is essentially in a holding pattern," said
analysts at Australia and New Zealand Bank.
"If anything, the assessment section was a touch softer,
suggesting the Fed are not trying to give the impression that it
is setting up for a December move."
STILL EYEING MARCH
Much of the market is still not pricing in a start of
tapering until March, when the Fed policy meeting will include
new economic forecasts from officials and a news conference by
Chairman Ben Bernanke.
It was notable that Fed funds futures barely budged
on the statement, showing investors still did not expect any
increase in official rates until well into 2015.
Likewise, short-dated Treasury yields stayed well anchored
while the longer end moved up only modestly. Yields on the
10-year note were steady at 2.53 percent, and far
below the 3 percent peak hit in early September.
Currency moves were also moderate, with the U.S. dollar
edging further away from recent lows. The dollar index
edged fractionally higher on the day to 79.814.
The euro dipped to $1.3713, losing gains made
Wednesday after data showed a jump in euro zone sentiment in
October. The dollar fared better against the yen to reach 98.44
, a move that offered some support to Japanese stocks.
There was more action in the New Zealand dollar which
bounced after the country's central bank said increases in
interest rates were still likely to be needed next year, putting
it well ahead of most other developed economies in tightening.
The currency rallied as much as half a U.S. cent in
reaction, though the central bank also noted that a strong
currency meant it might be able to wait longer before having to
In commodities, spot gold faded after rising the most in a
week at one stage on Wednesday. Gold fetched $1,338.73 an
ounce, down from a high of $1,359.16.
Brent crude eased 25 cents to $109.61 a barrel but
that followed gains on Wednesday as export disruptions in Libya
continued to cut supplies to Europe and Asia.
The benchmark U.S. contract was off 22 cents at
$96.55 a barrel after a bigger-than-expected increase in
inventories in the United States.