SINGAPORE, Oct 31 - The dollar firmed on Friday and Japanese bonds tracked U.S. Treasuries lower on strong U.S. economic expansion, but concerns over whether the growth could be sustained unsettled Asian stocks. Banks and brokerages such as Mizuho Financial Group <8411.T> and Nomura Holdings Inc <8604.T> led Japan's Nikkei average <.N225> down 1.3 percent, while weak technology stocks pushed Taiwan shares <.TWII> down one percent. Hong Kong, Singapore and Australian stocks swung in and out of positive territory, while MSCI's broadest index of Asian shares outside Japan <.MSCIAPJ> shed early gains to dip 0.3 percent. European stocks were set to open mixed with elation over the surprisingly firm U.S. growth tempered by concerns of interest rate rises in the United States and Britain. ABN AMRO may lend support after the Dutch bank posted solid sales and raised its 2003 guidance. Financial bookmakers expect Britain's FTSE 100 <.FTSE> to open between one point lower and five points firmer, Germany's DAX index <.GDAXI> to open down between one amd eight points, and France's CAC-40 <.FCHI> to start three to six points lower.
The dollar rose to 10-day highs on the euro following news the U.S. economy grew an annualised 7.2 percent in the third quarter, its fastest pace in almost 20 years. The gains came after a Congressional testimony by U.S. Treasury Secretary John Snow ended without him criticising Tokyo's market intervention. "The data showed U.S. demand was far stronger than expected in that quarter," said Hiroshi Yokotani, economist at Tokio Marine Asset Management. "With inventories down sharply, I expect strong a pick-up in U.S. production in the fourth quarter." The euro slipped to a low of $1.1610 in early Asian trade and was around $1.1615 in afternoon trade, slightly below late U.S. levels. The U.S. currency also strengthened versus the yen to hit 109.05 , above Thursday's high of 108.88. "The focus now is whether strength in the U.S. economy is real. If the U.S. jobs data next week shows strong readings, the dollar could be broadly bought," said Toshiyuki Suzuki, senior economist at UFJ Bank in New York.
SUSTAINABLE GROWTH?
Wall Street posted its third day of share gains but questions over whether the sizzling U.S. growth could be sustained drove investors to take profits, keeping key indices largely flat. The Dow Jones Industrial Average <.DJI> rose 0.12 percent and the Nasdaq Composite <.IXIC> shed 0.20 percent. Japan's Mizuho, the world's largest bank by assets, fell six percent on an announcement that regulators would order banks to give details on expected tax credits on loan-loss reserves when reporting earnings for the half-year ended September. The Nikkei ended at 10,559.6, but was still up 2.2 percent on the week. Fuji Photo Film Co Ltd <4901.T> gained 1.6 percent. After the market close, the world's second-largest maker of photo film reported a 1.8 percent fall in second-quarter profit. Hong Kong's key index <.HSI> was flat as a slew of initial public offerings took centre stage. China's second-biggest mobile carrier, China Unicom Ltd <0762.HK>, fell 4.5 percent after investment bank Merrill Lynch downgraded the stock to "sell" from "neutral", citing high valuation concerns. South Korean telecoms shares felt the heat of analysts' warnings of growing competition in the sector, with KT Corp <030200.KS>, the country's largest fixed-line carrier, losing 3.4 percent on a bigger-than-expected quarterly loss. The benchmark index <.KS11> shed 0.5 percent. Singapore shares inched up 0.3 percent ahead of earnings by DBS Group and United Overseas Bank Ltd . Analysts expected Singapore banks to post a combined 21 percent rise in quarterly earnings from a year earlier. The yield on 20-year Japanese government bonds rose to a two-month high after the allure of low-risk U.S. government debt was hit by the upbeat growth number, reviving fears among some investors that a rate hike was nearer. But some traders harked back to comments from the Federal Reserve earlier in the week that it saw rates at four-decade lows for some time. U.S. Treasuries recoup some losses on short-covering in Asia. The benchmark 10-year Treasury notes stood at 99-10/32, yielding 4.33 percent, compared with 99-08/32 and 4.34 percent in late New York. Oil edged up after slipping to one-month lows in New York as the market come to terms with ample supplies ahead of the northern winter. Data showed crude stocks rising for a third straight week. December NYMEX crude gained 25 cents to $28.77 a barrel. Spot gold was steady at $383.90 after retreating in New York.//www..xom