* Asia stocks fall as investors brace for more earnings
* NZ dollar hits 10-month peak on rising dairy prices
By Susan Fenton
HONG KONG, Aug 5 (Reuters) - Asian stocks fell on
Wednesday, after reaching 11-month highs earlier this week, as
investors braced for more earnings reports, but rising dairy
prices briefly pushed the New Zealand dollar to a 10-month
high.
Major European stock futures <STXEc1> were down 0.04
percent and U.S. equity futures <SPc1> were indicated 0.4
percent lower as some investors took profits from equity
markets' strong run-up in the past five months.
Asian investors took encouragement from surprisingly strong
U.S. housing data, but a sharp drop in U.S. personal income
suggested recovery of the world's biggest economy, Asia's
biggest export market, could be slow. A sluggish or erratic
recovery could blunt further gains for markets, or push them
lower.
Markets in Seoul and Tokyo shrugged off news that former
U.S. President Bill Clinton had secured the release of two U.S.
journalists jailed by North Korea as it was unlikely to ease
tensions between South Korea and its bellicose neighbour.
Japan's Nikkei index <> dropped 1.2 percent to close
at 10,253. Toyota Motor Corp <7203.T> faced light profit
taking, falling 1.2 percent, after the world's biggest
automaker cut its annual loss forecast but announced a third
straight quarterly loss on Tuesday [].
Rival Honda Motor Co <7267.T> told Reuters that improving
sales should return its car business to profitability in the
second half [] but its shares fell 1.3 percent.
"Investors now lack immediate trading factors, which have
run their course with the earnings season almost out of the way
after Toyota," said Soichiro Monji, chief strategist at Daiwa
SB Investments in Tokyo.
"It's hard to think the Nikkei could go above 10,500 for a
while."
In Hong Kong and mainland China, equities were depressed by
news reports that China would continue to rein in liquidity,
but there were gains for Cathay Pacific <0293.HK>, Asia's
fourth-biggest airline, as it returned to profit in the first
half. []
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was down 0.9 percent by early afternoon,
retreating slightly after its near 80 percent gain since a
rally in global equities began on March 9.
EASING BIAS
Falling Asian shares triggered some selling of
higher-yielding currencies such as the Australian dollar <AUD=>
in favour of the Japanese yen <JPY=>, which gained broadly.
Upbeat U.S. housing data supported improving risk appetite,
however, and kept the U.S. dollar close to 2009 lows against
the euro <EUR=>, while U.S. Treasuries fell, pushing South
Korean treasury bond futures slightly lower.
Surging asset prices and tentative signs of economic
recovery are now prompting many investors to consider when
policymakers will begin gradually tightening accommodative
monetary policy, analysts say.
Australia's central bank at a policy review on Tuesday
shifted to a neutral stance from an easing bias.
Australia announced a smaller-than-expected trade deficit
in June on Wednesday but a plunge in new vehicle sales in June
and a weak services sector report sounded a warning that its
economic recovery may not be strong enough to warrant an early
rise in interest rates [].
The New Zealand dollar <NZD=> briefly touched a 10-month
high at $0.6751 after New Zealand's Fonterra Cooperative Group,
the world's top dairy exporter, reported a strong rebound in
international dairy prices at its latest auction
[].
Commodity prices were generally firm on hopes that a global
economic recovery was gathering pace.
Shanghai copper prices rose nearly 2 percent while oil
prices edged higher again after Tuesday's retreat, with U.S.
crude futures heading towards $72 a barrel after a surprise
drawdown in U.S. crude inventories last week.
