

August 22, 2012|Reuters

* MSCI Asia ex-Japan up 0.3 pct, Nikkei opens down 0.6 pct
* Euro hits fresh 7-week high vs dollar
* Fed minutes fuel expectations of US stimulus
* China HSBC PMI due at 0230 GMT

By Chikako Mogi
a seven-week high on Thursday as the Federal Reserve's minutes
raised the prospect for more stimulus while uncertainty
continued over progress in Europe's debt crisis including the
European Central Bank's bold action.
Investors will be looking for clues on the outlook for the
world's second largest economy China in the second half of the
year, when China HSBC PMI figure, a measure for private-sector
manufacturing activity, is released around 0230 GMT.
Slowdown in China's growth and demand, stemming from the
slump in euro zone economy, has dragged exports from Japan,
South Korea and Taiwan, threatening to derail their recovery.
U.S. stocks erased most losses, Treasury bond prices rose
and the dollar fell after the minutes from the July 31-Aug. 1
Fed meeting showed it was likely to deliver another round of
monetary stimulus "fairly soon" unless incoming data point to
"substantial and sustainable" strengthening in the recovery.
MSCI's broadest index of Asia-Pacific shares outside Japan
inched up 0.3 percent while Japan's Nikkei stock
average opened down 0.6 percent, weighed by the yen's
The euro touched $1.2544 in early Asia, its highest
since July 4. The dollar traded at 78.55 yen, after
slipping to a low of 78.27 yen on Wednesday. The Australian and
New Zealand dollars rallied against the U.S. dollar on Thursday
on the minutes indicating the Fed's willingness to ease more.
But there were conflicting views on how much stimulus the
Fed may decide on.
"The data released since the August 1 conclusion does little
to sway the 'substantial and sustainable' requirement," said
Andrew Wilkinson, chief economic strategist at Miller Tabak &
Co. in a note.
"It seems that the stage is now set for (Fed Chairman Ben)
Bernanke to expand at his Jackson Hole meeting at the end of
this month upon the discussions that took place inside the Fed
at the start of August," he said, referring to the gathering of
central bankers and economists.

The Fed's last policy meeting preceded a slew of positive
reports including retail sales, industrial output and nonfarm
payrolls, which boosted the dollar and lifted 10-year Treasury
yields to a three-month high above 1.85 percent last
week, up sharply from a record low 1.38 percent hit on July 25.
The positive economic reports have scaled back expectations
somewhat, but hopes remain for the Fed to take further stimulus
at its September meeting.
"Since the meeting of the minutes, the environment has
changed to make it doubtful if the Fed will take as aggressive
an action as markets appear to have taken from the minutes,"
said Yuji Saito, director of foreign exchange at Credit Agricole
in Tokyo, noting positive U.S. data, improving mood surrounding
Europe's woes and surging grains prices.
Deepening quantitative easing could fuel inflationary
pressures as money will likely flow into grains, further pushing
up prices of U.S. corn and soybean which hit record
highs this summer due to the country's worst drought in 56
years, Saito said.
"It may still take some stimulus but that has already been
anticipated, and the Fed has merely kept such expectations
intact. Players probably sold the dollar to adjust their
positions ahead of meetings surrounding Greece," said Saito.
Market sentiment has also been underpinned after the ECB
suggested it will come up with measures to contain surging
yields of indebted Spain and Italy.
Uncertainty lingered over the effectiveness of Greek Prime
Minister Antonis Samaras' attempts to convince other European
officials that his country should be given more time to meet
targets for deficit cuts.
Eurogroup chief Jean-Claude Juncker kept alive Greek hopes
of winning more time to push through austerity cuts but warned
the country was staring at its "last chance" to avoid