by Vikram S Subhedar

Asian stocks retreated from 22-month highs, and higher-yielding currencies fell, as investors booked profits after risky assets ran up in recent sessions on the back of good economic data.

Shares in China <.SSEC> and Hong Kong <.HSI> were dragged down by property firms after tightening measures in the sector showed Beijing using more means to tighten policy, raising worries of more clamp-down measures to come.

U.S. stock futures slipped 0.5 percent after Google Inc's results after the close came short of some market forecasts and the dollar's gains against Asian currencies as well as higher government bond prices pointed to a sentiment shift away from risky assets.

Having seen double digit gains in share markets since early February, with expectations running very high coming into the U.S. March quarter profit-reporting season and China still in tightening mode, there is a high risk of a short-term pause or correction in share markets. Shane Oliver, head of investment strategy at AMP Capital Investors, said in an emailed note to clients.

European shares were seen falling on Friday, trimming lofty gains made over the past two sessions, as investors awaited quarterly results from global conglomerate General Electric and fresh insight on the outlook for company profits.

Financial spreadbetters expected Britain's FTSE 100 <.FTSE> to open 17 to 18 points lower, or as much as 0.3 percent down, Germany's DAX <.GDAXI> to open 21 to 30 points lower, or as much as 0.5 percent, and France's CAC-40 <.FCHI> to open 11 to 15 points lower, or as much as 0.4 percent.

Stock markets could be on the verge of a correction after a strong run-up, as investors take some profits and shift funds into safer havens.

While valuations are not expensive, investors are caught between an overheating Chinese economy that may prompt stricter interventionist measures and the U.S. economy which still appears fragile, Alvin Chong, head of research at Sun Hun Kai Financial, said.

In this environment investors are not willing to take on more risks, Chong said.

The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> fell more than 1 percent following a 16 percent rally from a February low.

Regional information technology <.MIAPJIT00PUS> and consumer staples stocks <.MIAPJCS00PUS> led the fall while Asian healthcare <.MIAPJHC00PUS> was the only group that was mildly positive.

Japan's Nikkei average dropped 1.49 percent, its sharpest fall in over seven weeks, with a firmer yen offering investors an excuse to take profits in exporters such as Tokyo Electron <8035.T>.

Expectations for solid earnings appear to have run their course as you can see in today's banking shares. The focus is now shifting to this financial year to March rather than immediate numbers, said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The Shanghai Composite Index <.SSEC> fell 0.81 percent in morning trade on a day when China launched trade in its first stock index futures, marking a milestone move as it attempts to deepen the country's young financial markets.

Property shares led the fall after the government announced fresh measures to cool the sector, including increasing mortgage rates and down payment requirements.


The dollar dipped 0.4 percent against the yen to around 92.67 yen but the dollar index, reflecting its trade against a basket of major currencies, rose 0.2 percent.

The dollar showed more solid gains against Asian currencies with the Korean won dropping 0.6 percent and the Malaysia ringgit down 0.5 percent.

The Australian and New Zealand dollars struggled against the yen, slipping further from multi-month highs as sluggish equities prompted funds to take profits.

The euro was on the backfoot, after the cost of insuring against a Greek default rose and spreads between Greek and German bond yields widened to near record levels.

European officials and the IMF have agreed to make available 45 billion euros in loans, but there are questions about how the package would be implemented.

Japanese government bond futures rose to their highest levels in a month, a day after a strong five-year auction and as traders took cues from a fall in Tokyo shares.

South Korean government bond prices edged up early on Friday, with treasury futures extending gains on resumed foreign buying.

Both benefited from U.S. Treasuries, which rallied as the weak U.S. labor market figures overshadowed surveys showing strength in U.S. manufacturing.

Latest data from fund-tracking firm EPFR showed that emerging market bond funds set an all-time weekly inflow record for the week ending April 14, taking in $1.8 billion of new money.

The combined emerging market equity funds tracked by EPFR Global showed a net investment inflow for the ninth straight week in the second week of April, but the $996.6 million they took in was only a third of the previous week's tally.

Seoul shares edged lower and were down almost 0.9 percent.

The market has been on a steep upward run since last month, perhaps a little too much a little too fast. It's now in technical correction territory, said Lim Dong-min, a market analyst at KB Investment & Securities.

Shares in Australia retreated 0.5 percent by midday, with banks giving up morning gains and miners weighed down by lackluster base metals prices.

U.S. crude futures slipped under $85 a barrel, adding to losses the previous day when a firmer dollar and mixed economic data sapped sentiment.