* MSCI Asia ex-Japan falls but hovers near 17-month high
* Nikkei slumps on profit-taking from 8-month peak
* Yen firms in kneejerk reaction after BOJ eases
* Commodities ease, dollar index inches up
* European shares likely to decline
By Chikako Mogi
TOKYO, Dec 20 Asian shares retreated from near
17-month highs on Thursday and commodities fell as negotiations
to avert a U.S. fiscal crunch turned to personal taunts, putting
at risk a timely solution as well as the health of the world's
European shares will likely follow suit, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX will open down as
much as 0.4 percent. A weak Wall Street start was suggested by a
0.4 percent drop in U.S. stock futures.
The yen firmed against the dollar and the euro in a kneejerk
reaction as the Bank of Japan eased monetary policy on cue,
expanding its asset-buying and lending programme by 10 trillion
yen under intensifying pressure from incoming premier Shinzo Abe
to confront chronic deflation.
Sentiment turned cautious towards risk assets in general,
hurting commodities and commodity-linked currencies while
keeping gold barely above its 3-1/2-month low hit earlier in the
week. The dollar edged up 0.1 percent against a basket of major
"Negotiations are (not progressing) which is probably why
we're seeing a sell-off today and the risk sentiment coming
off," said Natalie Rampono, a commodities analyst at ANZ in
Melbourne. "The markets are being directed by sentiment from the
U.S. fiscal cliff talks and so that will have the biggest
influence on prices at the moment."
MSCI's broadest index of Asia-Pacific shares outside Japan
eased 0.4 percent but held near its highest in
nearly 17 months, tracking global stocks which retreated from
17-month peaks on Wednesday on U.S. budget concerns.
Hong Kong shares also fell 0.5 percent after hitting
a near 17-month high the day before.
But Australian shares defied the general bearish
trend to add 0.4 percent to a 17-month high and Seoul shares
ended up 0.3 percent on speculation conservative Park
Geun-hye's victory in the presidential election would pave the
way for fresh stimulus measures from the government.
The conflict over the stalled fiscal cliff talks grew
heated Wednesday and threatened to become even more so Thursday
when the action is expected to shift for the first time to the
floor of the U.S. House of Representatives.
"If this discussion continues to go as it has gone today
(Wednesday), watch for more selling off as hopelessness begins
to take hold for many investors across all asset classes," said
Neal Gilbert, market strategist at GFT Forex, in a note to
The Nikkei stock average ended down 1.2 percent on
profit taking after closing Wednesday up 2.4 percent and above
the key 10,000 level for the first time since April, as earnings
prospects for exporters improved on the weak yen trend which
gained momentum with mounting expectations for more monetary
The dollar extended losses to fall 0.6 percent to 83.93 yen
after the BOJ's decision from around 84.20 before the
announcement. It hit a 20-month high of 84.62 yen on Wednesday.
The euro slid 0.6 percent against the yen to 110.94 yen,
sharply retreating from a 16-month high of 112.59 yen
reached on Wednesday.
On top of expanding stimulus for the third time in the past
four months, the BOJ also said it would review its guidelines
for medium- and long-term price stability at its next
policy-setting meeting in January. The current range is zero to
2 percent consumer inflation.
Traders said the yen's firmness was likely due to position
adjustments before the year-end holidays after the big event,
the last BOJ meeting for 2012, and likely to be short-lived.
"Market consensus is that the BOJ will have no choice but to
strengthen its accommodative stance, and expectations for easing
will remain intact," said Masashi Murata, senior forex
strategist at Brown Brothers Harriman in Tokyo. "The dollar/yen
was choppy but it is likely that 84 yen level will prove to be a
new support line," he said.
The euro inched down 0.1 percent to $1.3213, slipping
from a 8-1/2-month high of $1.33085 hit on Wednesday after an
Ifo Institute survey showed German business sentiment improving
in December at its fastest rate in 2-1/2 years, boosting hopes
Europe's largest economy will bounce back quickly after a weak
end to 2012.
Data from the Investment Company Institute, a U.S. mutual
fund trade organisation, on Wednesday showed investors in
U.S.-based mutual funds pulled $8.48 billion from equity funds
for the week ended Dec. 12, reflecting nervousness caused by the
uncertainty over the U.S. fiscal cliff.
U.S. crude fell 0.5 percent to $89.53 a barrel and
Brent fell 0.5 percent to $109.83.
London copper was down 0.6 percent to $7,879 a
Gold has fallen prey to funds taking profits before the
year-end book-closing but having held above a key technical
level, the metal's downside may be limited.
Spot gold steadied around $1,667 an ounce, above a
3-1/2-month low of $1,661.01 hit on Tuesday and its 200-day
Lacklustre equities slowed trading in Asian credit markets,
widening the spreads on the iTraxx Asia ex-Japan
investment-grade index by 1 basis point.