Asian shares halt US-led rally

Asian shares and the Australian dollar eased today as strong economic data rallied US stocks to record highs, throwing market focus back on to the possibility of reduced Federal Reserve monetary stimulus in the future.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 per cent at 467.33, moving towards Friday's five-week low of 464.99.

But losses were limited, with sentiment underpinned by the rise in the Dow Jones industrial average to another record high yesterday after data showed US home prices accelerated by the most in nearly seven years in March while consumer confidence picked up in May to its highest in more than five years.

The rally in global markets overnight was driven by bets on some funds would leave emerging markets go back to their home countries, and investors choosing to focus on the growth implications of strong US data, ignoring that it could add to speculation of the Federal Reserve scaling back its bond-buying programme, said Credit Agricole CIB's senior strategist Frances Cheung in Hong Kong.

"So, back in Asia, investors may be more worried about expectations for the Fed's tapering off because Asian markets have been benefitting a lot from the easy money from the US," she said.

Asian equities markets were likely undergoing a consolidation and moving sideways while investors try to sort out their story, she added.

Australian shares eased 0.1 per cent while South Korean shares rose 0.4 per cent. Hong Kong shares fell 0.8 per cent but Shanghai shares were up 0.1 per cent.

Speculation about the Fed’s policy has weighed on the Australian dollar, which has skidded nearly 8 per cent in May, the largest monthly drop since September 2011.

Yesterday’s stock rally lifted benchmark 10-year US Treasury yield to a 13-month peak around 2.17 per cent.

Reuters