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Asian stocks slip back after latest rally

Hong Kong - Asian markets retreated onWednesday, with Tokyo suffering its first sell-off after rallying 10% in four days while the dollar managed to maintain its seven-year highs against the yen.

The lead from Wall Street was neutral following a disappointing batch of economic indicators, while the euro edged up despite news that the European Commission had slashed its growth outlook for this year.

Tokyo slipped 0.27% after four days of advances that were bolstered by Friday's shock announcement from the Bank of Japan that it would widen its monetary easing programme.

Hong Kong lost 0.75% and Shanghai eased 0.47% after HSBC released figures showing activity in China's services industry had slowed. Sydney shed 0.59% and Seoul was flat.

Japanese shares enjoyed a huge boost and the yen tumbled after the BoJ decision, which will see vast sums of extra money pumped into the economy in a bid to tackle deflation and avert another recession.

Adding to the buying was news that the country's public pension fund - the world's biggest - will double the amount of equities in its investment portfolio.

"Last week's unexpectedly aggressive Bank of Japan easing action, combined with the Government Pension Investment Fund's stock-heavy allocation shift, has been a game-changer for equity markets," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Still, some profit-taking is eventually going to offset the new buying that takes place. But Nikkei downside is likely to be less pronounced... with more investors - including the government - standing ready to buy on the dip," he told Dow Jones Newswires.

The dollar, which on Monday rose above ¥114 for the first time since late 2007, stood at ¥113.57 early on Wednesday in Tokyo, compared with ¥113.63 in New York on Tuesday. The euro was at ¥142.61 yen against ¥142.55 yen in US trade.

The euro was also at $1.2557 against $1.2545 despite the European Commission's decision to cut its eurozone 2014 growth forecast to 0.8% from 1.2, and its 2015 estimate to 1.1% from 1.7%.

Focus is now on the European Central Bank's next policy meeting later this week, with analysts looking for some guidance on its plans for kick-starting the economy.

US shares ended broadly lower after the Commerce Department said new orders for manufactured goods fell and the trade deficit widened.

Analysts also said last week's initial estimate of growth in the third quarter, which came in at 3.5%, was likely overstated by as much as 0.4 percentage points, and that the current quarter would be slower.

The Dow edged up 0.09%, the S&P 500 dropped 0.29% and the Nasdaq slipped 0.33%.

On oil markets US benchmark West Texas Intermediate (WTI) for December delivery rose 17 cents to $77.36 while Brent crude for December fell 6c to $82.76.

The price of gold was $1 168.60 an ounce from $1 169.98 late on Tuesday.

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