Asian Shares Wither as Wall Street Pulls Back

Asian shares fell on Wednesday, echoing losses on Wall Street as concerns about escalating violence in Iraq eclipsed stronger economic data.

US Secretary of State John Kerry urged leaders of Iraq's autonomous Kurdish region on Tuesday to stand with Baghdad in the face of a Sunni insurgency, as security forces fought the rebels for control of the country's biggest oil refinery.

A senior US intelligence official said that the insurgents were "well positioned" to hold a broad swathe of territory captured in northern and western Iraq unless the Baghdad government can muster a counter-offensive.

MSCI's broadest index of Asia-Pacific shares outside Japan fell about 0.4 per cent, while Japan's Nikkei stock average lost 0.5 per cent.

S&P futures eased on Wednesday, pointing to a weak start on Wall Street.

In volatile US trading on Tuesday, the S&P 500 closed down more than 0.5 per cent in its sharpest loss since June 12, after earlier setting a fourth record high in five sessions following upbeat US economic data.

Sales of new homes surged 18.6 per cent to a seasonally adjusted annual rate of 504,000 units in May, the highest since May 2008 and the biggest increase since January 1992. Separate data from the Conference Board showed its index of consumer attitudes rose to 85.2 in June from a downwardly revised 82.2 in May.

But US Treasury prices shrugged off the brighter data and yields fell, with the benchmark 10-year rate dropping to 2.575 per cent in Asia from its US close of 2.586 per cent.

A trio of Fed officials gave investors no reason to believe the central bank's stance had changed. William Dudley, president of the New York Fed, said the US central bank can wait to raise interest rates until mid-2015 without risking an undesirable rise in inflation.

San Francisco Fed President John Williams said on Tuesday that the US economy is about two years from being "normal," while Philadelphia Federal Reserve Bank President Charles Plosser said the economy continues to improve, making steady rather than exuberant progress.

With no help from US Treasury yields, the dollar edged down about 0.1 per cent to buy 101.89 yen, while the euro also inched about 0.1 per cent lower to 138.63 yen.

"Overall, the yen looks better bid unless the Bank of Japan comes up with its next easing plan," said Bart Wakabayashi, head of forex at State Street in Tokyo.

Despite the BOJ's confidence that it will meet its inflation target next year without further stimulus, most economists still believe it will need to ease policy again by December, according to a Reuters poll published on Wednesday.

Japanese Prime Minister Shinzo Abe unveiled a package of measures on Tuesday aimed at boosting Japan's long-term economic growth, though market impact was muted.

The common currency was steady on the day at $1.3605.

The dollar index also consolidated at 80.312, solidly within the 80.000-81.000 range in which it has been stuck since May.

Crude oil markets were mixed as traders weighed the likelihood of supply disruptions from Iraq.

US prices rose on a Wall Street Journal report that the government has allowed two companies to export ultra-light oil known as condensate, a first step that effectively loosens a 40-year ban on most US crude exports.

US crude for August delivery advanced about 0.7 per cent to $106.73 a barrel, after spiking as high as $107.50 early in the session.

Brent crude for August fell 0.2 per cent to $114.28.

"Oil prices have been unusually stable in recent years, but events in Iraq are causing a reassessment of medium-term oil market fundamentals that we expect to translate into a phase of higher long-term prices and more volatile trading conditions," strategists at Barclays said in a note to clients.

"Geopolitical risks have replaced China's growth and Fed policy as the main concerns for investors," they said.

Spot gold slipped about 0.4 per cent to $1,311.80 an ounce, after spiking to a more than two-month high of $1,325.90 on Tuesday.

Copyright: Thomson Reuters 2014