Asian stocks dip, euro stuck near one-year lows

Tags: Stock Market
Asian shares drifted lower on Tuesday, with momentum from prior gains fading as investors were left short of cues with the US markets closed on Monday, while the euro continued to probe one-year lows in the uncertainty over the European Central Bank's policy decision later this week.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.2%. The index managed to carve out gains on Monday, brushing aside the Ukraine crisis and a downbeat China manufacturing survey.

Tokyo's Nikkei edged up 0.4%, lifted by a weaker yen.

In currencies, the euro traded flat at $1.3131, within striking distance of $1.3119, a one-year low struck on Monday.

The common currency was expected to remain under pressure ahead of Thursday's European Central Bank policy meeting.

While many market participants do not expect the ECB to take major easing steps this week, a few are seen braced for new policy measures with further central bank easing considered a matter of when and not if in the face of risks to euro zone growth posed by the Ukraine conflict and stubbornly low inflation.

"This week may start to mark the biggest shift in global monetary policy since 'Abenomics' went into full steam on the appointment of Haruhiko Kuroda to head up the BOJ," equity strategists at Jefferies wrote in a note to clients.

The decline in European headline inflation rates, collapse in German bund yields and the call by the president of the ECB for 'growth friendly' fiscal policy suggests that Europe is finally moving towards quantitative easing, they said.

The dollar, boosted by the flagging euro, was little changed at 104.37 yen. Gains above 104.49 would take the greenback to a seven-month high versus the yen.

Immediate focus was on the ISM's report on US manufacturing due later in the day, which might point to the US phasing out quantitative easing just as the ECB contemplates its adoption.

The currency markets will also be keeping an eye on the Reserve Bank of Australia's policy review due later in the session, although little Australian dollar reaction is expected since the chance of a rate change is just about zero.

In commodities, palladium hovered near a 13-1/2 year high of $910 an ounce hit overnight on fears that possible Western sanctions against Russia over the Ukraine crisis could hit supply from the world's top producer of the metal, while gold nudged higher.

Spot palladium last traded at $905.25 an ounce. Russia accounted for more than 40% of global palladium supply last year.

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