Asian shares inch down from this week’s three-year highs

Reuters: Asian shares pulled away from this week’s three-year highs on Friday after a mostly flat day on Wall Street, though a fresh S&P closing record and upbeat U.S. employment data underpinned sentiment.
Overnight data from France and Germany showed business activity in those countries strengthened in both July and June, but risks to the euro zone economy from any tougher sanctions on Russia limited the euro’s gains.
A survey on Thursday from China showing factory activity expanded at its fastest in 18 months in July also continued to give cautious markets a lift.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down about 0.3% in early trade, though still on track for solid weekly gain of more than 1%, while Japan’s Nikkei stock average added 0.6%, poised to rise 1% for the week.
“The prospect for the global economy has not been too bad thanks to recently strong U.S. shares and China data, but we should not be overly optimistic,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

US jobless claims fall to lowest level since early 2006 Reuters: The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labor market recovery was gaining traction. Initial claims for state unemployment benefits declined 19,000 to a seasonally adjusted 284,000 for the week ended July 19, the Labor Department said on Thursday. That was the lowest level since February 2006, and confounded economists’ expectations for a rise to 308,000. The data provided further confirmation that the labor market is tightening. Employment has grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the late 1990s. “This is consistent with another payroll reading for July, but it will probably not be as strong as June,” said Sam Bullard, senior economist with Wells Fargo Securities in Charlotte, North Carolina. US stock index futures held on to slight gains after the data, while the dollar erased losses versus a basket of currencies. Prices for US Treasury debt fell and yields on the 30-year bond hit session highs.Federal Reserve Chair Janet Yellen cautioned last week that the Fed could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers. Economists currently do not expect the US central bank to start raising interest rates before the second half of 2015. The Fed, which is wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008. “The Federal Reserve will look at this (jobless claims data) as a favorable development for the jobs market as they look toward timing for normalising monetary policy,” Bullard said. While jobless claims tend to be volatile around this time of the year, when automakers shut down plants for retooling, a Labor Department analyst said there were no special factors influencing the state level data. The four-week average of claims, considered a better gauge of labor market trends as it irons out week-to-week volatility, fell 7,250 to 302,000, the lowest level since May 2007. The claims report showed the number of people still receiving benefits after an initial week of aid fell 8,000 to 2.50 million in the week ended July 12, the lowest level since June 2007. The so-called continuing claims data covered the household survey week from which the unemployment rate is calculated. Continuing claims fell 68,000 between the June and July survey periods, suggesting the unemployment rate could decline from near a six-year low of 6.1%. The unemployment rate for people receiving jobless benefits was unchanged at 1.9% for the week ended July 12. The decline in continuing claims indicates some long-term unemployed Americans are finding jobs, a key metric for Fed policymakers.

Fujito said that long-only investors have stayed on the sidelines as geopolitical concerns in Gaza and Ukraine have curbed their appetite for risk. He also said that investors are waiting for more positive trading cues, after the International Monetary Fund cut its 2014 forecast for global economic growth.
On Wall Street overnight, the S&P 500 eked out a slight gain to its second record closing high in a row, even after earnings painted a mixed picture of the economy. [.N]
After a run of solid tech sector results this week, Amazon reported a much bigger loss than expected, even as sales of the biggest U.S. online retailer surged. Shares tumbled 10.6% in after-hours trade, wiping more than $17 billion from its market valuation.
Still, investors took heart from data released on Thursday which showed U.S. initial jobless claims declined 19,000 to a seasonally-adjusted 284,000 for the week ended July 19. That was the lowest since February 2006.
A separate report showed U.S. new home sales dropped 8.1% in June, their biggest decline since July last year. But economists noted that other data has pointed to housing getting back on track after stalling late last year.
“There is no question that the labour market is strengthening but the pace of improvement is still falling short of the Fed’s expectations,” Kathy Lien, managing director of FX strategy at BK Asset Management, wrote in a note to clients.
Fed Chair Janet Yellen said last week that the Fed could raise rates sooner than initially expected if labour markets continued to improve. Most economists expect the U.S. central bank to start raising interest rates in the second half of next year.
Ongoing unrest in the Middle East and Ukraine continued to keep investors alert for any developments that could have a wider impact on risk sentiment and markets.
Gaza authorities said Israeli forces shelled a shelter at a U.N.-run school on Thursday as any truce remained elusive. Meanwhile, a U.S. State Department spokeswoman said that Russia was firing artillery across its border with Ukraine to target Ukrainian military positions.
Euro moves off 8-month low
Upbeat data helped the euro climb off an eight-month low of $1.3438 touched on Thursday. The common currency was steady on the day in Asia at $1.3465.
The dollar was little changed against the yen at 101.78 after spiking more than 0.3% overnight to a two-week high of 101.86 yen after the U.S. jobless claims data.
The greenback, which has been closely correlated to U.S. yields, got a lift as U.S. Treasury yields rose after the benefit claims report. For the week, it was poised to gain about 0.4% against the Japanese currency.
The yen showed little reaction to Japanese consumer price data released early on Friday that was in line with forecasts and did not do much to stir expectations for further monetary easing by the Bank of Japan. Core consumer prices rose 3.3% in June from a year earlier, matching forecasts.
Gold was steady at $1,292.70 an ounce after dropping to a one-month low overnight on the improved U.S. and European economic data, though the Gaza and Ukraine tensions limited losses by supporting demand for safe-haven assets.
U.S. crude edged down about 0.2% to $101.91 a barrel.