Asian shares, gold and oil eased on Tuesday as investors locked in recent gains while keeping an eye on the ailing dollar, which was pinned near 15-month lows on expectations that U.S. interest rates will stay extremely low for some time.
The dollar edged up against a basket of major trading-partner currencies <.DXY> but its downtrend was seen as intact after Federal Reserve Chairman Ben Bernanke said tight credit and a weak job market would weigh on a U.S. economic recovery.
Leading European stock indexes also looked set to fall on Tuesday, according to bookmakers, while U.S. equity futures were down 0.3 percent.
Markets showed little reaction to a summit between U.S. President Barack Obama and Chinese President Hu Jintao in Beijing. The leaders said they would work to ease trade and economic frictions between the two giants but appeared to break no new ground on the contentious issue of the value of the yuan.
Obama nudged Hu to allow the yuan currency to appreciate but the Chinese leader had no public comment on either the yuan or the dollar.
Asian stock markets surrendered early gains, with the yen's strength against the dollar weighing on shares of Japanese exporters and offsetting gains in commodities-linked shares after a surge in oil and gold prices overnight.
The Nikkei average <.N225> fell 0.6 percent, while the MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> slipped half a percent after earlier hitting its highest level since late July last year. Analysts said some investors were taking profits from a more than 8 percent spurt in the Asia ex-Japan index over the past two weeks.
A global equities rally is showing signs of losing steam as it extends into a ninth month, though analysts are divided over whether stocks will consolidate around current levels before pushing higher again or suffer a correction.
Investors are growing cautious about the prospect for further significant gains amid forecasts for only a sluggish economic recovery next year.
There is view out there that the market has run ahead of itself a little bit, Markus Mueller, a director with stockbroker Reynolds & Co. in Sydney, said of the stock rally.
Bernanke's remarks that the Fed would need to keep rates exceptionally low for some time and better-than-expected U.S. retail sales data had fueled broad gains on Wall Street overnight, with the Dow Jones industrial average <.DJI> rising 1.3 percent. <.N>
Bernanke acknowledged in a speech that the dollar's slump was raising some prices but said other factors restraining inflation were winning the day, helping reinforce the market's already benign view toward U.S. rates.
WEAK DOLLAR SUPPORTS COMMODITIES
Gold eased off record highs set on Monday and hovered above $1,135 an ounce while U.S. crude futures slipped after a more than 3 percent jump in the prior session, but the outlook remained firm with the weak U.S. dollar lending support for these alternative assets.
For now, (investors) would rather book profits than chase prices higher, said Kazuhiko Saito, chief analyst at Fujitomi Co in Tokyo, referring to the gold prices approaching a resistance level around $1,150 per ounce.
Spot gold prices have surged some 29 percent so far this year, buoyed by the slumping dollar and fears of inflation.
There is also caution about heightening volatility next week when Tokyo and U.S. markets will be closed and trading volume will drop, he added.
(Additional reporting by Denny Thomas in SYDNEY and Chikako Mogi in TOKYO; Editing by Kim Coghill)