* Nikkei drops 3.1 pct, Asian ex-Japan shares down 0.6 pct
* European seen opening down as much as 0.7 pct
* Dollar comes off 1-week low vs basket of currencies
* Gold off 4-week high
By Dominic Lau
TOKYO, Jan 14 Asian shares came under pressure
on Tuesday, with Japanese stocks tumbling more than 3 percent as
the yen hit a four-week high against the dollar after last
week's surprisingly weak jobs report raised concerns about the
U.S. growth outlook.
European stocks were expected to wake up on the grumpy side,
with Britain's FTSE 100, Germany's DAX and
France's CAC 40 seen opening down as much as 0.7
percent, according to financial bookmakers.
Tokyo's Nikkei sagged 3.1 percent in relatively
active trade, hitting a one-month low and posting its biggest
one-day decline in five months as investors there were drawn
into the fallout from the nonfarm payroll report following
Monday's public holiday in Japan.
The Nikkei, like Wall Street, has got off to a slow start to
the year after a stellar 2013, with a 57 percent jump.
Australian shares lost 1.5 percent on Tuesday as the S&P/ASX
200 index suffered its biggest one day decline in 3-1/2 months
following Wall Street's fall overnight, with investors cautious
ahead of corporate results and iron ore prices near record lows.
MSCI's broadest index of Asia-Pacific shares outside Japan
slipped 0.6 percent after gaining 0.8 percent in
the previous session as the disappointing U.S. jobs report added
to the case for the Fed to keep rates low for longer.
While the weak U.S. jobs report raised doubts about how
quickly the Federal Reserve would scale back its stimulus, it
also stoked concerns about the pace of recovery in the world's
The announcement of a $13.6 billion deal by Japan's Suntory
Holdings Ltd to buy U.S. spirits company Beam Inc
may offer some support to the dollar versus the
Dollar/yen was one of the strongest-performing major
currency trades last year, and many hedge funds have been
betting the trend will continue as the Federal Reserve cuts back
its bond-buying programme while the Bank of Japan remains
committed to providing stimulus.
Given the extent of positions in the market and continued
softness in U.S. yields this week, USD/JPY could continue to
test lower near-term," analysts at BNP Paribas wrote in a note,
adding they expected to see buying interest ahead of 101.50.
Japanese investors were likely to seek higher returns
overseas as the yield differential between U.S. government bonds
and Japanese government debt widened, further boosting the yen
weakness if their investments were not hedged.
"The gradual widening in the rate differential between the
U.S. and Japan should also encourage Japanese investors to
invest in foreign bonds," Nomura Securities said in a note.
"The expected gradual rise in global yields, while Japanese
yields are expected to remain relatively low thanks to the BOJ's
JGB investment, should also influence foreign investment in the
The yield on 10-year Japanese government bonds
eased 3 basis points to 0.650 percent, a near
one-month low, while benchmark U.S. bond were yields
were 2.837 percent.
The dollar was up 0.3 percent at 103.30 yen, having
fallen 1.1 percent overnight, its biggest one-day slide since
Sept. 18 and hitting a four-week low. A stronger yen tends to
erode the competitive edge of Japanese exporters abroad and
their dollar earnings when repatriated.
Against the Aussie dollar, the greenback bounced
0.2 percent to $0.9038, having touched a four-week low of
$0.9054 on Monday, while the Australian shares dropped
1.5 percent, reaching a three-week trough and logging its
biggest one-day decline in 3-1/2 month.
The euro was little changed at $1.36655, however.
The dollar was up 0.1 percent at 80.611 versus a
basket of major currencies after touching a one-week low of
80.469 on Monday.
Overnight, U.S. stocks tumbled on caution ahead of corporate
results, as mounting negative pre-announcements left a
lacklustre profit growth outlook, with the Standard & Poor's 500
off 1.3 percent.
According to Thomson Reuters Proprietary Research, almost 10
out of every 11 earnings pre-announcements for the current
reporting season from S&P 500 companies have lowered estimates.
U.S. banks are in the spotlight this week, with JPMorgan
Chase & Co, Bank of America, Citigroup and
Goldman Sachs reporting quarterly earnings.
Among commodities, gold was steady at $1,252.49 per
ounce, though it was not far from a four-week high of $1,254.80
set on Monday. The precious metal gained 0.5 percent overnight
to extend Friday's 1.6 percent rally following the disappointing
U.S. employment report.
U.S. crude futures edged 0.1 percent higher at $91.91
a barrel, stabilising after Monday's 1 percent decline after
news of a deal between Western powers and Iran to curb the OPEC
country's nuclear programme and as production resumed from Libya
and a key North Sea oilfield.