Asia stocks steady; Nikkei bruised by BOJ pivot bets

MSCI's broadest index of outside Japan was last little changed and strayed not too far from a seven-month peak hit in the previous session, as traders shrugged off higher-than-expected U.S. inflation rate data.

Attention now turns to producer price data in the world's largest economy due later on Thursday, which feeds into the core personal consumption expenditures (PCE) price index.

The core PCE index is the U.S. Federal Reserve's preferred measure of inflation.

Retail sales figures for February are also due later in the day and comes ahead of the Fed's policy meeting next week, where focus will be on clues as to how soon policymakers could commence their rate-easing cycle.

"Since the FOMC (Federal Open Market Committee) last met, the U.S. inflation data have come in a bit stronger than expected, while the labour market generally has remained resilient," said economists at Wells Fargo in a client note.

"With payroll growth still solid and inflation proving to be a bit stickier recently, we suspect the FOMC will still be seeking greater confidence at the end of its meeting next week that inflation is headed back to 2% on a durable basis."

Still, the run of better-than-expected U.S. economic data has done little to alter the trajectory of the dollar, which was broadly weaker on the day as traders remained focused on the prospect of lower U.S. rates by the end of the year.

The euro hovered near its recent two-month high and last bought $1.0949, while the Australian and New Zealand dollars rose 0.12% and 0.26% respectively, buoyed by gains in commodity prices. [FRX/]

In China, the blue-chip CSI300 Index rose 0.46%, while the Shanghai Composite Index edged 0.25% higher, both reversing some of the loss of the previous session and shrugging off news that a Washington-based global trade association representing biotechnology companies is taking steps to "separate" from Chinese member Wuxi AppTec .

Hong Kong's Hang Seng Index fell 0.1%, dragged by technology stocks which slid 0.9%.

Country Garden Holdings was last up 1.7%, after tumbling nearly 5% in the previous session after the Chinese developer said funds for a 96 million yuan ($13.35 million) coupon payment due Tuesday were not fully in place.

RIPE FOR CHANGE

In Japan, swirling speculation that the BOJ could end negative interest rates as soon as next week kept the yen and domestic yields supported.

The currency rose marginally to 147.71 per U.S. dollar on Thursday while the 10-year Japanese government bond (JGB) yield was up 2.5 basis points at 0.78%. [JP/]

The Nikkei was meanwhile kept under pressure and eased 0.2%. [.T]

Investors have been increasingly pricing in the chance of a March policy shift, particularly after news of bumper pay rises from some of Japan's biggest names at this year's annual wage negotiations.

A preliminary survey on big firms' wage talks is due on Friday. BOJ policymakers have said the talks are key to determining the timing of the central bank's stimulus exit.

"I think an earlier decision to scrap NIRP (negative interest rate policy) in March will suggest that the BOJ's confidence in achieving its 2% inflation target is much stronger, so I think that could have some impact on market expectations for the pace of rate hikes beyond the first decision to scrap NIRP," said Yujiro Goto, head of FX strategy for Japan at Nomura.

"I think it's more important if the rate hike expectations into next year increase or not, after the decision to scrap NIRP. That's (potentially) more important on financial markets. A timing for a second rate hike could be more important for the JGB and yen market."

In commodities, Brent rose eight cents to $84.11 a barrel, while U.S. crude gained seven cents to $79.79 per barrel. [O/R]

Spot gold was little changed at $2,174.69 an ounce. [GOL/]