* Ahead of US payrolls, investors tread cautiously
* U.S. dollar holds gains after surging overnight
* Oil flat at $66; energy shares tumble
By Kevin Plumberg
HONG KONG, June 4 (Reuters) - Asian equities fell from
eight-month highs on Thursday, led by commodity-related shares,
after disapppointing U.S. private employment and services
sector data led investors to trim over extended bets.
Major European stocks were expected to rise as much as 0.4
percent, according to financial bookmakers, though convictions
were low with U.S. stock futures <SPc1> pointing to a lower
open later and the European Central Bank and the Bank of
England meeting to set policy.
The U.S. dollar was largely steady against the euro after
rebounding sharply overnight, benefitting as investors cut bets
on higher-yielding currencies and after a Reuters story said
Asian monetary officials would stick with U.S. Treasuries even
if the top U.S. sovereign debt rating was downgraded.
[]
Materials and energy stocks led the decline in Asian stocks
from eight-month highs reached on Wednesday, following a 2.8
percent decline overnight in the Reuters-Jefferies CRB index
<.CRB>, a global commodities benchmark.
The real test of investors' willingness to take risks for
higher returns will come on Friday, when the May U.S. payrolls
number is released. []
"A dose of much needed reality has been swallowed by
markets overnight. The tone of economic data has not so much
changed, but perception of what constitutes an outright
positive story certainly has," said Patrick Bennett, Asia
foreign exchange and rates strategist with Societe Generale in
Hong Kong, in a note.
The MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> fell 2.8 percent, the biggest single-day
decline since May 14.
The index was still up 31 percent so far in 2009. Utilities
were largely unchanged on the day, as investors shifted some
money to defensive bets, and consumer discretionary stocks
outperformed on hopes domestic growth in Asia will remain
resilient.
Japan's Nikkei share average <> edged down 0.75
percent, with industrial names like Fanuc <6954.T> and
Shin-Etsu Chemical <4063.T> among the biggest drags on the
market.
Small signs of hope in Japan's exports and production have
paved the way for foreign investors to scoop up bargains, with
official data showing foreign net purchases of equities for
three of the last four weeks.
In Hong Kong, the Hang Seng index <> was down 2.4
percent, hurt by a mixed bag of banks, property developers and
energy-related stocks, as the pause in the global equity rally
encouraged shrinking both positions and exposure to risk.
BERNANKE'S BALANCE
In testimony to the U.S. House of Representatives, Federal
Reserve Chairman Ben Bernanke gave an upbeat assessment of the
economy, saying he expects activity to turn up later this year,
but also warned the nation needed to plan now for what he
called "fiscal balance."
The yield on the 10-year U.S. Treasury note has climbed 134
basis points so far this year, partly as investors shift out of
ultra-safe assets and also because of concerns the world will
not want to finance the growing U.S. budget shortfall.
The 10-year future <TYc1> was flat while in the cash market
the 10-year yield <US10YT=RR> was up about 3 basis points after
tumbling 8 basis points on Wednesday.
The yield on the 10-year Japanese government bond
<JP10YTN=JBTC> dipped to 1.53 percent after hitting a
seven-month high of 1.55 percent on Wednesday, weighed by the
drop in Treasury yields on Wednesday.
U.S. reports on Wednesday showed companies shed 532.000
private sector jobs in May, more than expected, while a gauge
of the giant U.S. services sector reflected contraction for the
eighth consecutive month.
"The U.S. data reminded market participants once again that
the economic outlook isn't so rosy as many have been saying
lately," said Hideki Amikura, deputy general manager of foreign
exchange trading at Nomura Trust and Banking.
He said the much talked-about 'green shoots' scenario may
peter out after restocking in the April-June quarter, which is
usually more buoyant than the first quarter as firms tend to
boost inventories.
U.S. crude for July delivery <CLc1> was largely unchanged
on the day, at $66.00 a barrel after a 3.5 percent decline
overnight. Brent crude was trading at about $65.90 a barrel
<LCOc1>.
Oil prices were still up about 48 percent year-to-date,
thanks to a small production-based recovery around the world.
Still, data released on Wednesday showed U.S. fuel demand
for the four weeks ended May 29 was down 7.7 percent on an
annual basis, suggesting the recovery may be sluggish.
The dollar has had a big influence on crude prices, with
oil gaining when the currency weakens and vice versa.
After tumbling overnight, the euro recovered a bit and rose
0.3 percent from late New York to $1.4200 <EUR=>, more than a
cent below a high for the year of around $1.4337 reached early
on Wednesday.
(Additional reporting by Aiko Hayashi in TOKYO)
(Editing by Kazunori Takada)
