* MSCI Asia ex-Japan inches up, Nikkei scales 8-mth peak
* Yen slips to near 9-month low vs dollar, boosts Nikkei
* U.S. budget talk uncertainty weighs on markets
* European shares expected to be narrowly mixed
By Chikako Mogi
TOKYO, Dec 13 Asian shares extended gains for a
seventh day on Thursday, after the U.S. Federal Reserve took new
stimulus steps to bolster the economy, pressuring the yen with
expectations the Japanese central bank will follow suit with
more easing next week.
While stocks gained, oil and gold fell from post-Fed
rallies, as investors took profits ahead of the year-end, and
concerns over the U.S. budget impasse also weighed on sentiment.
The upside for equities was also contained despite the Fed's
fresh dose of liquidity-pumping measures, as investors were
worried the United States would miss a year-end deadline to
avert the "fiscal cliff," some $600 billion of tax hikes and
spending cuts scheduled to start in January.
U.S. House of Representatives Speaker John Boehner said on
Wednesday "serious differences" remain with President Barack
Obama on the budget talks.
Failure to reach a compromise by the end of the year risks
pushing the U.S. economy into recession and has stoked fears
that a fragile recovery trend emerging in China and some other
countries would be stifled.
Against this backdrop, European shares were expected to
start narrowly mixed, with financial spreadbetters predicting
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX will open flat to 0.2 percent higher. A
0.1 percent gain in U.S. stock futures hinted at a firm
Wall Street open.
MSCI's broadest index of Asia-Pacific shares outside Japan
added 0.3 percent to a 16-month peak, having hit
successive 16-month highs since Dec. 5. South Korean shares
advanced 0.8 percent to a two-month high.
"The Fed's easing measures met the market's expectations,
while the setting of clear inflation and unemployment targets
exceeded hopes and will clear uncertainty on the monetary
front," said Kim Yong-goo, an analyst at Samsung Securities.
The U.S. central bank committed to monthly purchases of $45
billion in Treasuries on top of the $40 billion per month in
mortgage-backed bonds it started buying in September. But it
also took the unprecedented step of indicating interest rates
would remain near zero until unemployment falls to at least 6.5
YEN WEAKNESS CONTINUES
The dollar advanced to its loftiest in nearly nine months
against the yen, touching a high of 83.635 yen. The
slumping yen boosted Japan's Nikkei share average up 1.6
percent and above 9,700 for the first time in eight months.
Japan holds an election on Sunday, with opinion surveys
showing conservative former Prime Minister Shinzo Abe's
opposition Liberal Democratic Party and its smaller ally heading
for a resounding victory.
Abe wants to step up aggressive monetary easing along with
heavy public works spending, policy prescriptions dubbed
"Abenomics" by the media, and while he threatens to curtail the
Bank of Japan's independence, investors reckon the
responsibility of power will prevent Abe taking excessive risks
that could lead to a bond market meltdown.
"As the Fed sets direction on policy rates for the rest of
central banks and equity markets, the Bank of Japan sets the
currency vehicle, by stepping up asset purchases and driving
down the yen once LDP Chief Abe becomes the likely PM at
Sunday's elections," Ashraf Laidi, chief global strategist at
City Index, said in a note to clients.
At its Dec. 19-20 meeting, the BOJ is widely expected to
further ease monetary policy to support its weak economy.
The Fed's latest move to make the jobless rate a target for
its monetary policy could have a longer-term implication on the
"While the BOJ's ultimate goal is to pull Japan out of
deflation, the Fed's latest move could prompt Japanese
politicians or the government to urge the BOJ to also commit
itself to growth, not just price stability," said Chotaro
Morita, chief fixed income strategist at Barclays.
Morita said that market consensus is for the BOJ to expand
its asset-buying and lending programme, currently at 91 trillion
yen ($1.1 trillion), by another 5-10 trillion yen, and put off
taking bolder steps until after a new cabinet is formed.
Rising U.S. Treasury bond yields also drew demand for the
dollar against the yen, given the stable and low Japanese
BETTER EUROPEAN NEWS
The euro was relatively more robust than the dollar and the
yen, inching up 0.1 percent to $1.3082 to approach
Wednesday's high of $1.3098, as some positive news emerged.
Europe clinched a deal on Thursday to give the European
Central Bank new powers to supervise euro zone banks, the first
step in a new phase of closer integration to help underpin the
Greece's foreign lenders welcomed a bond buyback, paving the
way for Athens to get long-delayed aid to avoid bankruptcy.
In Italy, another debt-straddled euro zone country, Silvio
Berlusconi offered to stand back and make way for Mario Monti as
Italy's next leader if the outgoing technocrat premier agreed to
run as the candidate for a centre-right coalition. Monti's
intention to resign has raised concerns that his austerity
policies may not be carried out.
Oil prices retreated from overnight gains, with U.S. crude
futures down 0.2 percent to $86.57 a barrel and Brent
falling 0.2 percent to $109.24.
Gold tumbled more than 1 percent on stop-loss selling after
touching their highest in nearly two weeks on Wednesday. Spot
gold dropped as much as 1 percent to $1,693.80.