The dollar hovered near a four-week high, supported by an upbeat
outlook for the U.S. economy from Federal Reserve Chairman Ben
Bernanke that fanned expectations of faster stimulus reduction by
the U.S. central bank.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> shed 0.7 percent, reaching a two-week low and adding
to a 1.1 percent drop on Friday. The index lost 1.7 percent last
year, sharply underperforming U.S., Japanese and European stocks.
China's CSI300 index <.CSI300> sagged 2.5 percent, hitting a
five-month low after the HSBC/Markit services sector Purchasing
Managers' Index fell to 50.9 in December from 52.5 in the previous
month, with new business expansion the slowest in six months.
The Chinese index is down 4.2 percent since the start of the year,
adding to last year's 7.6 percent decline.
"What have been the principal sort of driver of the market since the
beginning of the new year has been a disappointment of the Chinese
PMI data," Guy Stear, Asian credit and equity strategist at Societe
Generale in Hong Kong, referring to the manufacturing PMI released
"The focal point of the Asian markets is more on Chinese growth and
on Chinese political situation and how it's going to pan out this
year, rather than worrying about how tapering will affect Asia
specifically," he added.
The Thai baht fell a near four-year low of 33.09 per dollar and Thai
stocks <.SETI> dropped 1.4 percent, hitting a 16-month trough driven
by heightened political uncertainties ahead of next month's general
In terms of valuations, Thai equities were relatively expensive,
with its 12-month forward price-to-earnings of 11.9, slightly ahead
of a five-year average of 11.4 and the MSCI Asia-Pacific ex-Japan's
11.7, according to Thomson Reuters Datastream.
LIMP START FOR NIKKEI
Japan's Nikkei share average <.N225> stumbled 2.2 percent in the
first trading day of 2014. The benchmark jumped 57 percent last year
to mark its best annual rise since 1972 on the back of massive
fiscal and monetary stimulus.
As Japanese equities took a beating, the yen got some respite
against the dollar, up 0.5 percent at 104.29 yen, not far from a
two-week high of 104.08 yen touched last Friday.
Against a basket of major currencies, the dollar <.DXY> added 0.1
percent to near a four-week high set on Friday, helped by Bernanke's
Bernanke, who steps down as head of the Fed at month's end, gave an
upbeat assessment of the U.S. economy in coming quarters, but he
tempered the good news in housing, finance and fiscal policies by
repeating that the overall recovery "clearly remains incomplete".
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U.S. stocks ended last week slightly weaker, with the Standard &
Poor's 500 <.SPX> down 0.5 percent for the week after it jumped 30
percent in 2013. <.N>
U.S. JOBS, ECB THIS WEEK
Friday's nonfarm payrolls data will give further clues as to how
well the U.S. economy is recovering and how fast the Fed will unwind
its stimulus campaign, which has been a major driver for global
assets in the past few years.
"With the Fed having set the tapering process in motion, it would
likely take a fairly significant miss to derail tapering
expectations and push yields significantly lower from their year-end
levels," analysts at BNP Paribas wrote in a note.
"Against this backdrop, the dollar is likely to remain generally
well-supported this week, particularly versus the lower-yielding G10
currencies," they added.
Before the jobs report on Friday, investors will focus on the
minutes of the Fed's December policy meeting, due out on Jan 8, and
the European Central Bank's policy gathering on Thursday.
The euro was little changed at $1.35835, taking a pause after
dropping 0.6 percent in the previous session.
Among commodities, gold advanced 0.5 percent a near three-week high
of about $1,242.6 an ounce, heading for a fifth day of gains. The
precious metal suffered a 28 percent slump in 2013, its worst yearly
performance since 1981, largely due to the Fed's plan to unwind its
U.S. crude futures gained 0.1 percent to above $94 a barrel, coming
off a four-week low set on Friday after data showed a
larger-than-expected build in distillates.
(Additional reporting by Lisa Twaronite
in Tokyo; editing by Edwina Gibbs and Eric Meijer)
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