Asian stocks stepped back from near eight-month highs on Thursday and the dollar eased as European and U.S. central banks reinforced investor worries about the global economic outlook and trade protectionism. In a fresh escalation of trade tensions, U.S. President Donald Trump has threatened new tariffs on goods from the European Union even as the Sino-U.S. trade dispute remains unresolved.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3 per cent after four straight days of gains took it to the highest since last August. Chinese shares were subdued with the blue-chip CSI300 off 1 per cent while Hong Kong's Hang Seng index tumbled 0.6 per cent.
Australian shares also lost ground, pressured by political uncertainty after the country's prime minister called a national election for May 18. Japan's Nikkei fell 0.3 per cent as the yen strengthened.
"It has been another mixed day in the market with investors still searching for the next push one way or the other and the majority of products are trading at familiar levels," said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia. "Traders continue to operate in a 'wait and watch' mode as they look for the next opportunity in a cautious market. Two big event risks are now behind us with the ECB and Fed."
On Wednesday, the European Central Bank (ECB) kept its loose policy stance and warned that threats to global economic growth remained. The ECB has already pushed back its first post-crisis interest rate hike, and President Mario Draghi raised the prospect of more support for the struggling eurozone economy if its slowdown persisted. "If, as we expect, growth in the euro-zone continues to disappoint over the coming months, we think that ECB policymakers will adopt an even more accommodative stance," analysts at Capital Economics wrote in a note.
Separately, data showed U.S. consumer prices increased by the most in 14 months in March but underlying inflation remained benign against a backdrop of slowing global economic growth.
Minutes from a March 19-20 meeting of Federal Reserve policymakers showed they agreed to be patient about any changes to interest rate policy as they saw the U.S. economy weathering a global slowdown without a recession in the next few years. U.S. Treasury yields slipped in response, reinforcing expectations that the Fed would hold rates steady or possibly cut them by the end of the year.
Those expectations helped European and U.S. shares overnight. On Wall Street, the S&P 500 added 0.35 per cent, the Nasdaq climbed 0.7 per cent while the Dow was barely changed. "There were big worries last year that central banks globally are moving towards policy tightening. Those fears have reversed now," said Shane Oliver, chief economist at AMP.
"That is a reasonably positive backdrop for equities," Oliver added. "The complication is the growth slowdown." However, he added some encouraging economic signs were now emerging, helped by the "great retreat" on policy by global central banks, fiscal stimulus in China and progress in Sino-U.S. trade talks.
In currencies, the British pound was slightly higher at $1.3099 after European leaders agreed to extend the deadline for the UK to leave the union to the end of October, averting a potential crash out of the bloc on Friday with no divorce deal. Sterling has stayed in a triangle holding pattern between $1.2945 and $1.3380 during the past month or so.
The dollar index fell for a fourth straight day to 96.931 against a basket of major currencies. The euro was barely changed at $1.1277 while the Japanese yen paused after three days of gains at 111.04. In commodities, Brent futures eased 16 cents to $71.57 a barrel. U.S. crude dipped 27 cents to $64.34. Gold hovered near a two-week top on Thursday at $1,307.03 an ounce.
(With inputs from agencies.)