Asian shares fell on Wednesday after the minutes from the US Federal Reserve's March meeting reduced expectations of further stimulus measures to spur growth, leaving investors looking for more clues to the global economic outlook.
European equity markets will likely follow the weak Asian mood, with financial spreadbetters predicting major European markets to open as much as 0.8% lower. US stock futures were down 0.4%.
Fed policymakers remained focused on a still elevated jobless rate while noting signs of slightly stronger growth, but the minutes suggested the appetite for further quantitative easing, so-called QE3, has waned significantly in light of an improving US economy.
Along with falling stocks, gold extended losses from Tuesday's 2% while the dollar held on to gains.
MSCI's broadest index of Asia Pacific shares outside Japan fell 0.8%. Japan's Nikkei average fell more than 2%, and below the key 10,000 points level, to a one-month low, raising concerns that Tokyo's strong equities rally so far this year was screeching to a halt.
"The minutes do not suggest any change in the Fed's broad policy stance, and the central bank still stands ready to take additional easing measures if economic conditions worsen," said
Makoto Noji, senior strategist at SMBC Nikko Securities.
"While the US economy is firming now, signs of slowdown in Australia, China and the euro zone would eventually put downside risks to the export-reliant US economy," he said.
Hong Kong and Shanghai markets were closed for a public holiday.
Gold and Dollar
Spot gold fell 0.1% to $1,645 an ounce while US gold futures slipped as much as 1.8% to $1,642 an ounce. Copper fell 0.7% to $8,510 a tonne on waning hopes for more Fed stimulus.
Mining firms weighed on Australian shares while the Australian dollar tumbled to a fresh 11-week low of $1.0263 after the country's trade balance surprisingly showed a deficit in February.
Diminished expectations of QE3 - the creation of money by the central bank to buy assets - lifted the dollar index against a basket of key currencies to its highest since March 26. But the dollar struggled to gain further against the yen after recovering from Tuesday's three-week low of 81.55 yen.
Whether gold closes the week above or below its 55-week moving average, which stands at $1,642, will set the direction for not only bullion prices but also the dollar, analysts say.
"Everything is linked through the phenomenon of massive cash supply from central banks," said a Singapore-based trader. "The minutes seem to support a view that the Fed is not going to pump more and more cash into the markets."
More Fed stimulus would be tantamount to printing money and depreciate the dollar's value, which in turn would enhance the appeal of gold.
Non-Farm Payrolls, Debt Sales
The markets will face key US non-farm payrolls data on Friday, which could offer further evidence for a reduced need of additional monetary measures to spur faster economic growth.
The US economy likely notched up a fourth month of solid job growth in March and is expected to have added 203,000 jobs last month, according to a Reuters survey, after non-farm payrolls rose 227,000 in February.
In a double test of appetite for lower-rated debts, the Spanish Treasury will sell up to 3.5 billion euros in debt and Portugal will offer 18-month bills for the first time since March 2011, a month before the European Union and International Monetary Fund staged a rescue.
Oil also extended its decline as the Fed dashed hopes of further economic stimulus for the world's largest oil consumer, while top crude exporter Saudi Arabia pledged to keep output high in the event of a strategic stocks release.
US crude futures eased 0.5% to $103.53 a barrel while Brent fell 0.2% to $124.62.
A recent rise in oil prices is one indication for recovery staying on track, and concerns about high oil prices hurting US growth may be overblown, some argue.
"US gasoline demand falling to its weakest since 2001 in January suggests the impact from rising oil prices is not as damaging to consumer sentiment and the broad economy as in the past when demand for gasoline was strong," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments.
