Oil prices slipped to seven-week lows on Wednesday, lifting Asian shares, while the dollar gained on fresh warnings over the euro's strength ahead of an expected U.S. interest rate rise later in the day. Gold prices stood just below a 16-year high of $436.60 an ounce hit on Tuesday, U.S. light crude fell nine cents to $47.28 a barrel and Japanese government bonds rose after a strong auction of five-year JGBs. Trade was cautious ahead of the Fed meeting, a string of corporate earnings and gross domestic product figures from Japan on Friday. Currency markets were waiting for the release of U.S. trade data for September at 1330 GMT, although some analysts doubted the figures would have much impact. "If the trade deficit is $50 billion or $60 billion or $45 billion, it doesn't matter. It's still huge," said Jake Moore, a currency strategist at Barclays Bank.
"It will have to be a shocking number to have any material impact on people's thoughts about the dollar." The dollar bought 105.85 yen , up from 105.67 in late U.S. trade and half a percent off a seven-month low of 105.28 yen hit on Monday. The euro fetched around $1.2895 , little changed from the $1.2900 in late New York trade but down about one cent from a record high of $1.2987 on Monday. The Fed is widely expected to raise interest rates by a quarter of a percentage point, which would bring the key U.S. federal funds rate to 2 percent. Most analysts doubted a rate rise would reverse negative sentiment on the U.S. currency. European officials expressed fears on Tuesday that the dollar's recent slide against the euro could hurt a global economic recovery. A stronger euro shields the euro zone from high oil prices, but makes its exports more expensive.
CAUTIOUS VIEW
An MSCI index of Asia Pacific shares outside Japan <.MSCIAPJ> stood just 0.2 percent off four-year highs hit on Monday, led by a 1.9 percent rise in South Korean shares <.KS11>. Markets also focused on Chinese data that showed industrial output slowed to 15.7 percent in the year through October, which economists said would help reduce pressure for another increase in interest rates this year. Tokyo's Nikkei stock average <.N225> closed up 0.3 percent at 10,994.96. "More investors have begun taking a cautious view towards Japan's corporate and economic outlook and now we have another thing to worry about -- a worsening Iraq situation and how that will affect crude oil prices and global economies," said Yasuo Yabe at Meiwa Securities, referring to heavy fighting in the Iraqi city of Falluja. Yamanouchi Pharmaceutical Co. Ltd. <4503.T> and Fujisawa Pharmaceutical <4511.T> rose around 3.6 percent after the companies, which will merge to create Japan's number two drugs firm next April, announced their medium-term strategy on Tuesday. Global stocks as measured by the MSCI World index <.MSCIWD> stood 0.6 percent below three-year highs hit on Friday.
OIL PRICES SLIDE
Oil prices fell ahead of U.S. data later in the day that is expected to show a seventh straight rise in crude inventories and a small increase in distillate stocks, which include heating oil. The drop helped lift some indexes in Asia, which imports most of its oil. Australian shares <.AXJO> closed up 0.3 percent at a record high, lifted by a 1.3 percent rise in National Australia Bank after it met market expectations with a 21 percent rise in second-half cash earnings. Shares rose between 0.06 and 0.6 percent in Taiwan <.TWII> Hong Kong <.HSI>, and Singapore <.STI. In South Korea, Korean Air Co. <003490.KS> climbed 5.6 percent and technology bellwether Samsung Electronics Co. Ltd. <005930.KS> gained 1.9 percent. Australian, Indonesian, New Zealand and Sri Lankan shares are trading around record highs. In U.S. equities, Cisco Systems Inc. , the biggest maker of equipment that directs data over the Internet, said after the market closed that quarterly earnings rose 29 percent on stronger demand for its networking gear. Its shares fell 1 percent in after-hours trade. Japanese government bond prices rose, with the yield on the benchmark 264th 10-year cash bond <0#JPTSY=JBTC> down 1.5 basis points at 1.490 percent. Spot gold was steady around $433.50 an ounce, versus $434.95/$435.70 an ounce in the U.S. market.////