By Eric Burroughs
TOKYO, May 1 (Reuters) - Japanese stocks retreated on
Thursday as investors booked profits on the market's biggest
month of gains in 13 years, while the dollar dipped and oil
prices jumped after the Federal Reserve left the door open to
more interest rate cuts.
The Fed trimmed rates by a quarter-point to 2 percent as
widely expected, but in its accompanying statement the U.S.
central bank said it would "act as needed" to help support the
economy, which has been battered by the credit crisis and a
severe housing slump.
The Fed was cautious on the economic outlook and failed to
more firmly rule out further rate cuts, as some investors had
expected because of the flare-up in inflation pressures. The
possibility of another rate cut lifted U.S. Treasuries as well as
Japanese government bonds.
Investors moved to take some winning bets off the table after
the Nikkei share average <> surged 10.6 percent in April,
its biggest monthly rise since 1995, on a sharp rebound in bank
and financial shares.
Activity was limited with many countries observing Labour Day
holidays on Thursday. Financial markets in China, Hong Kong and
Singapore were among those closed, and most markets in Europe
will also be shuttered. But U.S. markets will be open later.
Many Japanese investors are also away for the country's
Golden Week holidays. After a one-day break on Tuesday, Japanese
markets will be shut again next Monday and Tuesday.
"Investors can't really move as the big event -- the Fed
meeting -- is over and until they see the U.S. market moves after
the holiday here and a series of upcoming important earnings
results," said Naoki Koga, a senior fund manager at Toyota Asset
Management.
Koga said the Tokyo market will pay particular attention to
earnings by blue-chip stocks next week such as Sony Corp <6758.T>
and Toyota Motor Corp <7203.T> as the health of the U.S. and
Japanese economies would be reflected in their outlooks.
The Nikkei slipped 0.6 percent to 13,766.86, while Japan's
broader TOPIX index <> fell 0.9 percent to 1,346.10.
Shares of banks led the drop. Mizuho Financial <8411.T> fell
5 percent to 513,000 yen, while top lender Mitsubishi UFJ
Financial Group <8306.T> shed 3.8 percent to 1,101 yen.
Australian stocks also lost ground. The benchmark S&P/ASX 200
index <> fell 9.6 points, or 0.2 percent, to 5,585.8, also
led by losses in bank shares. The index rose 4.5 percent in
April.
In currencies, the euro edged up 0.1 percent from late U.S.
trade to $1.5630 <EUR=> and has rebounded from one-month lows hit
the previous day to hold near a record peak of $1.6020 struck
last week.
The dollar dipped 0.2 percent against the yen to 103.78
<JPY=> after having pulled back from a two-month peak of 104.89
yen hit on Wednesday.
Market players are now looking ahead to a batch of key U.S.
reports on manufacturing activity and employment over the next
two days for more clues about how the economy is holding up.
"A weak jobs report could revive market pessimism about the
U.S. economy and knock the dollar towards 100 yen again," said
Kazuyuki Takami, a senior manager of the currency trading group
at Bank of Tokyo-Mitsubishi UFJ.
U.S. government data on Wednesday showed the economy was
barely growing. Gross domestic product, the broadest measure of
activity, expanded 0.6 percent annualised in the first quarter
and matched the tepid pace of the October-December quarter.
Treasuries held solid gains from Wednesday. The benchmark
10-year note <US10YT=RR> was flat in price to yield 3.736
percent, off a three-month high of 3.918 percent hit last week.
Japan's 10-year government bond yield <JP10YTN=JBTC> fell
half a basis point to 1.570 percent and was down 10.5 basis
points from a four-month peak hit at the start of the week.
Bond investors have been snapping up JGBs since a massive
sell-off last week. JGBs were helped after the Bank of Japan
struck a more neutral stance on policy in its twice-yearly
outlook report on Wednesday, reinforcing expectations any BOJ
rate hike would be several months away.
The dollar's woes helped oil and gold both bounce back, which
in turn lifted shares of resource producers.
Gold climbed about $3 to $876.40 <XAU=>, up from a
three-month low of $862.30 hit the previous day.
U.S. crude oil futures jumped $1.14 to $114.60 a barrel
<CLc1> on the weaker dollar and the extension of an oil worker
strike in Nigeria.
(Additional reporting by Aiko Hayashi, Chikako Mogi and Satomi
Noguchi in Tokyo, Fayen Wong in Perth and Lewa Pardomuan in
Singapore; Editing by Hugh Lawson)
