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Asia shares drop ahead of U.S. data


MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.8%, after reaching a two-year top last week

Asia shares dropped on Monday ahead of U.S. price data that investors are banking on to show a renewed moderation in inflation, while markets were on alert for Japanese intervention as the dollar tested the 160 yen barrier.

Geopolitics also loomed large, with the first U.S. presidential debate on Thursday and the first round of voting in the French election at the weekend.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.8%, after reaching a two-year top last week. South Korean stocks also dropped 0.8%.

S&P 500 futures and Nasdaq futures were both dithering either side of flat. Shares in Boeing could face pressure after Reuters reported U.S. prosecutors are recommending criminal charges be brought against the aircraft maker.

EUROSTOXX 50 futures dropped 0.1%, while FTSE futures shed 0.3%.

Japan’s Nikkei edged up 0.7%, with the continued decline in the yen putting pressure on the BoJ to tighten policy despite patchy domestic data.

Minutes of the central bank’s last policy meeting out on Monday showed there was much discussion about tapering its bond buying and hiking rates.

Japan’s top currency official voiced disapproval with the yen’s latest decline which saw the dollar hit 159.94.

The dollar was trading just a shade weaker at 159.74, eyeing the 160.245 high from late April where Japan is thought to have started spending nearly $60 billion buying the yen.

Demand for carry trades, borrowing yen at low rates to buy higher yielding currencies, has also seen both the Australian and New Zealand dollars hit 17-year highs on the yen.

Even the euro was testing recent highs at 170.87 yen, despite being saddled with a round of soft manufacturing surveys which left it stuck at $1.0692.

The decline in the Euro area flash June PMI raises some concern that the nascent rebound is being cut short, JPMorgan analysts stated in a note.

They added: The abruptness of the decline is notable against the backdrop of the French election, which was mentioned explicitly by firms as a reason for the drag.

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