* Asian shares consolidate after flat finish on Wall St
* Nikkei struggles to sustain rally; China's central bank
* Euro up broadly as dollar dogged by disappointing data
By Wayne Cole
SYDNEY, Feb 19 Asian share markets were in
hesitant mood on Wednesday as investors keep a wary eye on
interest rates in China, though the euro left the dollar in its
dust after soft U.S. economic data argued for the Federal
Reserve to be patient on stimulus.
The action was light, with MSCI's broadest index of
Asia-Pacific shares outside Japan barely
budging. Seoul lost 0.4 percent, but Sydney edged higher
on solid earnings results.
Japan's Nikkei pared its early losses to be off 0.6
percent, battling to maintain the momentum of Tuesday's 3
percent rally which followed a decision by the Bank of Japan to
expand a scheme to encourage more bank lending.
The move was taken as a sign that the central bank was open
to further easing steps, which many expect will be needed once
an increase in Japan's sales tax is enacted in April.
Dealers kept a careful eye on China's central bank after it
drained funds from the money market on Tuesday, though it had
taken no new action as yet on Wednesday which helped the
Shanghai market bounce by 0.9 percent.
The People's Bank of China (PBOC) is trying to engineer a
gradual upward shift in the cost of money to encourage companies
to deleverage and discourage high-risk shadow banking activity.
Investors are anxious in case the tightening goes too far
and hurts economic growth, concerns that have periodically put
pressure on currencies and shares across the Asian region.
Wall Street failed to offer much of a lead with the Dow
off 0.15 percent on Tuesday, while the S&P 500
added 0.11 percent. The Nasdaq fared better with a gain
of 0.68 percent, bringing its winning streak to eight straight
sessions, the longest since July.
The tech-heavy index was boosted by a jump in the shares of
Tesla Motors Inc on speculation Apple might
be interested in bidding for the electric car maker.
Disappointing data on New York manufacturing and U.S.
housing added to the case for the Federal Reserve to be patient
in its tapering plans and pushed Treasury yields lower, so
undermining the dollar's interest rate advantage.
Yields on the benchmark 10-year U.S. Treasury note
eased 4 basis points to 2.71 percent.
Later on Wednesday, the Fed will release minutes of its
January policy meeting when it decided to trim its monthly asset
buying by another $10 billion.
Fed Chair Janet Yellen has since indicated that the central
bank was still inclined to keep tapering, though markets assume
the run of soft data will encourage patience in its efforts.
MIND THE GAP
The euro was holding broad-based gains after the dollar took
a hit from the soft economic data and news that foreign
investors had been heavy sellers of U.S. assets.
The euro was up at $1.3765 in Asian trade, having
stretched as far as $1.3769 overnight, its highest in seven
weeks and breaching a key resistance barrier at $1.3740.
The euro was also firm at 140.70 yen, while the
dollar eased back to 102.20 yen.
Dealers have been surprised by the single currency's
resilience given speculation the European Central Bank would
have to ease further to avert the risk of deflation.
Figures from the U.S. Treasury on Tuesday hinted at one
possible reason for the euro's performance -- an outflow of
almost $120 billion from U.S. assets in December.
Alan Ruskin, global head of G10 currency strategy at
Deutsche Bank in New York, noted that the net outflow from U.S.
equities over 2013 has amounted to a huge $214 billion.
In contrast, the euro zone attracted inflows into stocks of
111 billion euros. At the same time, the euro zone enjoyed a
record current account surplus of 216 billion euros in 2013,
while the United States ran up a deficit of almost $400 billion.
"That the euro was the strongest major currency in 2013 is
easily - with all the benefit of hindsight - explained by this
current account and equity flow gap," Ruskin said.
In commodity markets, gold slipped to $1,315.85 an ounce
after running into selling at a 3-1/2-month peak of $1,331.10.
U.S. crude rose to a fresh four-month high on forecasts of
lower crude and oil products stockpiles due to new pipeline
capacity and robust winter demand.
Nymex crude futures were 42 cents higher at $102.85,
having jumped 2.4 percent on Tuesday, while Brent crude
edged down 19 cents to $110.27 a barrel.