Asian shares in fragile mood, Nikkei tests support

Asian markets were in skittish mood on Thursday following a late dip on Wall Street, with Tokyo stocks slipping as investors counted down to a rise in sales tax that is expected to swat consumer spending and test the market's faith in Abenomics.

The Nikkei fell 1.2 percent to threaten major chart support around 14,203, a break of which could trigger a retreat to 14,000. The sales tax rises to 8 percent from 5 percent on April 1, which is also the start of the new financial year in Japan.

Following its usual inverse relationship with stocks, the yen briefly pushed to the highest in a week against the U.S. dollar at 101.71.

Talk of possible stimulus in China had been supporting Asian stocks in recent sessions, but the effect was starting to fade given the lack of any concrete steps.

The Australian market shed 0.9 percent while MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 percent. Stocks in South Korea, Taiwan and Singapore all managed minor gains.

Some blamed Wall Street's slip on news the United States and the European Union had agreed to work together to prepare possible tougher economic sanctions in response to Russia's behaviour in Ukraine.

The Dow ended down 0.60 percent, while the S&P 500 fell 0.70 percent. The technology-heavy Nasdaq Composite Index lost 1.43 percent to a low not seen in six weeks.

The U.S. losses were led by technology stocks, with Facebook (FB.O) off almost 7 percent a day after announcing a $2 billion takeover of Oculus VR Inc, a maker of virtual-reality glasses for gaming.

Shares in Citigroup Inc fell after hours when the Federal Reserve rejected its plans to buy back $6.4 billion of stock and boost its dividends, citing deficiencies in the bank's ability to plan for stressful situations.

Others blocked by the Fed in their plans for higher dividends or share buy backs included the U.S. units of HSBC, RBS and Santander.

DIVERGING YIELDS

In debt markets, the talk was all about Wednesday's auction of new U.S. five-year notes that drew such stellar demand from investors that it left dealers with the lowest share of an offer on record.

That drove five-year yields down a sharp 7 basis points to 1.74 percent, unwinding some of the rise seen since Federal Reserve Chair Janet Yellen last week spooked markets with talk of rate hikes next year.

Yields in Europe have been falling even more as policymakers there hint at radical stimulus measures. Some of the European Central Bank's most conservative policymakers have said the bank could adopt more unconventional measures to tackle a surging euro and ward off deflation.

As a result the premium that U.S. two-year notes offer over German debt hit a 15-month high on Wednesday, making the euro relatively less attractive against the dollar.

That saw the single currency ease to $1.3783, well off the week's peak of $1.3875. The biggest loss came against the Australian dollar where the euro sank 0.9 percent to a four-month trough at A$1.4910.

The U.S. dollar was a touch softer against a basket of major currencies at 79.999.

In precious metals trading, spot gold was subdued at $1,304.96 an ounce after plumbing a 5-week low of $1,298.29 on Wednesday.

U.S. crude oil was holding at $100.18 a barrel having gained a dollar on Wednesday as inventories at the future's delivery point dropped for the eighth straight week.

Brent for May delivery was off 19 cents at $106.84 a barrel.

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