* Asian shares hit one-year high, Nikkei erases losses
* Global bonds rally on ECB easing hopes, Japanese yield
hits 1-year low
* Gold hits 4-month low as dollar recovers
By Hideyuki Sano
TOKYO, May 29 Asian shares inched up to a
one-year high on Thursday while global bond prices surged,
pushing their yields to multi-month lows, supported by
expectations of easier monetary policy from the European Central
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.15 percent, led by gains in Hong Kong
and Singapore shares and hitting one-year highs
for the fifth time in the last six sessions.
Japan's Nikkei share average gained 0.1 percent.
Spreadbetters see European shares opening mostly flat, with
Germany's DAX seen unchanged after hitting a record high
the previous day and Britain's FTSE 100 seen up to 0.1
On Wall Street, the S&P500 index snapped a
four-session winning streak on Wednesday to end slightly below a
record closing high hit on Tuesday, though it achieved an
intraday record high.
Bond yields fell sharply as investors prepared for the ECB's
expected easing. German 10-year Bund yields fell
to a one-year low of 1.285 percent and periphery euro zone debt
yields also tumbled, with Spanish debt yielding a
record low of 2.823 percent.
"In the past, when share prices rise, bond prices fell. But
that no longer applies. We are likely to see a combination of
high share prices and low bond yields," said Daisuke Uno, chief
strategist at Sumitomo Mitsui Banking Corp.
An unexpected increase in German unemployment and a
deceleration in the euro zone money supply on Wednesday
reinforced expectations that the ECB will introduce further
stimulus at its meeting on June 5.
ECB executive board member Yves Mersch ramped up the
rhetoric, saying the next meeting could yield a combination of
policies to tackle low inflation and low credit growth, but the
timing of implementation could vary.
Measures being prepared by the ECB are likely to include
cutting the deposit rate into negative territory - effectively
charging banks to hold cash at the ECB overnight - and bank
loans to increase lending to smaller companies.
"The ECB's easing is the biggest thing for markets for now.
Nobody at this point clearly knows the ramifications of negative
rates. In our dealing room, we have had heated debate but got no
conclusion," said a proprietary trader at a major Japanese bank.
"But at least it's something that will help bring down
long-term bond yields," he added.
The prospect of radical easing spilled over to other
markets, with the 10-year U.S. Treasuries yield falling to 2.44
percent from 2.52 percent, hitting its lowest level in almost 11
U.S. Treasuries were also supported by expectations that the
Federal Reserve will be slow to raise rates even after it has
stopped asset purchases.
The Japanese government bond yield broke out of months-old
range to hit one-year low of 0.560 percent.
The prospect of ECB easing also pinned the euro near
a 3 1/2-month low of $1.3587 hit on Wednesday. It last stood at
The British pound was also fragile, hit in recent days by a
combination of slightly weaker economic data and inklings of
nascent political risk to Britain's long-term status-quo after
the European elections.
The pound fell to a one-month low of $1.6697 on
Wednesday and last stood at $1.6723.
As a result, the dollar index edged near its April 4
peak of 80.599, last standing at 80.468.
The dollar eased to 101.65 yen as U.S bond yields
came down, shrinking the dollar's yield advantage over the yen.
As the dollar gained, gold slipped to lowest level in
almost four months, trading at $1,258.10 an ounce, licking its
wounds after suffering its biggest daily fall since mid-December
Elsewhere, London copper hovered near three-month
high on dwindling global supply but iron ore fell to its lowest
level since September 2012 on a deepening glut.
(Editing by Eric Meijer)