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Asia stocks consolidate after decade high

Asian stocks are edging down, consolidating after touching their highest in a decade, while the US dollar is holding steady before the US inflation report for August is published.

Financial markets are on tenterhooks ahead of a run of data due on Thursday from China, including factory output, fixed asset investment and retail sales, that will show the strength of the world’s second-biggest economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan were down 0.1 per cent on Thursday after rising to its highest since 2007 the day before.

Japan’s Nikkei was effectively flat following its climb to a one-month high on Wednesday.

Wall Street edged up to a record high on Wednesday with gains in consumer discretionary and energy stocks helping offset losses in technology heavyweight Apple Inc.

The US dollar index against a basket of six major currencies stood tall, lifted as US Treasury yields climbed to 2-1/2-week highs on an ongoing improvement in broader investor risk sentiment.

The US dollar index was at 92.399 after touching 92.530 overnight, its highest since September 5. It had slumped to a 2-1/2-year low of 91.011 on Friday, when Hurricane Irma threatened the continental United States and on North Korea concerns.

Focus returned this week to fundamentals from geopolitical risks and natural disasters, with investors poised for the US consumer price index (CPI) due later in the session and its potential impact on the Federal Reserve’s stance on interest rates.

Expectations for the Fed to hike rates again in 2017 have waned as US inflation has proved to be relatively sluggish.

“The dollar would be sold if the CPI turns out to be weak but the main focal point is how the stock market reacts to such an outcome,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“The US financial sector has benefited from the recent rise in yields. Should yields fall on lacklustre CPI data, that could be used as a pretext to sell US stocks which have already hit successive record highs.”

The US dollar was unchanged at 110.510 yen after setting a one-month high of 110.690 overnight. So far this week it has gained 2.5 per cent against its Japanese peer, a currency often sought in times of risk aversion.

The euro was steady at $US1.1890 after losing 0.7 per cent the previous day, while sterling was flat at $US1.3211.

The pound hit a one-year high of $US1.3329 on Wednesday following strong domestic inflation data, with the currency market braced for the closely-watched Bank of England (BoE)policy meeting due later on Thursday.

The BoE must decide on Thursday how forcefully to phrase the prospects of a first interest rate rise in a decade when it weighs up the need to help Britain’s Brexit-bound economy against tackling a jump in inflation.

In commodities, crude oil prices dipped slightly after posting a big surge overnight after the International Energy Agency (IEA) said a global surplus of crude was starting to shrink.

Brent crude futures was down 0.3 per cent at $US55.00 per barrel after reaching a five-month peak $US55.21 the previous day.

US crude slipped 0.2 per cent to $US49.22 per barrel after rallying 2.2 per cent overnight.

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