Asian Markets Fluctuate as Eyes Turn to US Inflation

Asian investors moved cautiously Tuesday as the recent global rally sputtered, while trade tensions returned and markets look ahead to the release of crucial US inflation data.

A strong jobs report on Friday and Donald Trump's decision to meet Kim Jong Un helped fuel a surge in global equities at the end of last week, overshadowing US tariffs and fears of a trade war.

But concerns returned following comments from a European trade commissioner that the EU would "stand up to bullies" while Trump said he will look into cutting levies the bloc imposes on US goods.

The Dow and S&P 500 each fell, though the Nasdaq ticked up to another record high.

Attention is now on the inflation release later in the day, which will be pored over for an idea about the Federal Reserve's timetable for hiking interest rates.

A strong reading could hit markets worried about the impact of higher borrowing costs on the investment environment.

"Equity investors are finding it difficult to ignore the gnawing concerns about trade wars and are adopting a defence first strategy despite the (positive) jobs number," said Stephen Innes, head of Asia-Pacific trade at OANDA.

"Keep in mind the spotlight will be on US (consumer inflation) tonight, and it was only one month ago a surprise inflation print sent the market into a tailspin, so likely some caution ahead of the critical US inflation data. Overall investors remain very cautious as sentiment recovers."

- Yen strength -Asian markets swung in and out of positive territory through the morning and by the end Tokyo was up 0.7 percent.

Hong Kong fell 0.2 percent while Shanghai finished 0.5 percent lower.

Seoul added 0.4 percent and Singapore put on 0.3 percent but Sydney slipped 0.4 percent. Wellington and Taipei were both higher, while Manila, Bangkok and Jakarta fell.

"We need to brace ourselves for a possible impact in case that (inflation) turns out to be higher than expected," forex strategists at Mizuho Securities said in a commentary.

The dollar edged up but was still struggling against the yen as traders fret about the political future of Japanese Prime Minister Shinzo Abe and Finance Minister Taro Aso, who have both been sucked into a land deal scandal.

The controversy comes as dealers eye a wind-down of Japan's crisis-era stimulus programme, which is expected to put upward pressure on the yen, with some commentators saying the greenback could fall below 100 yen for the first time since 2016.

"The theme for 2018 is the risk of the dollar-yen breaking 100," said Masashi Murata, a currency strategist at Brown Brothers Harriman in Tokyo. 

The yen above that level "wouldn't look excessive from the perspective of its fundamentals", he told Bloomberg News.

- Key figures around 0710 GMT -Tokyo - Nikkei 225: DOWN 0.7 percent at 21,968.10 (close)

Hong Kong - Hang Seng: DOWN 0.2 percent at 31,521.61

Euro/dollar: DOWN at $1.2333 from $1.2335 at 2040 GMT

Pound/dollar: DOWN at $1.3896 from $1.3905

Dollar/yen: UP at 106.80 yen from 106.40 yen

Oil - West Texas Intermediate: DOWN 16 cents at $61.20 per barrel

Oil - Brent North Sea: DOWN 15 cents at $64.80 per barrel

New York - Dow: DOWN 0.6 percent at 25,178.61 (close)

London - FTSE 100: DOWN 0.1 percent at 7,214.76 (close)