Tokyo - Asian shares fell on Wednesday as investors booked gains from recent rallies after data showing strong US retail sales and Germany and France avoiding a contraction last quarter calmed sentiment, with weak eurozone growth sustaining stimulus hopes.
European stocks were likely to track Asian equities lower, while a 0.3% drop in US stock futures signalled a soft Wall Street start. Financial spreadbetters called the main indexes in London, Paris and Frankfurt to open down as much as 0.6%.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7% after Tuesday's 0.7% rise. The index was up about 2.8% from this month's low hit before optimism for more stimulus in coming weeks from the European Central Bank and the Federal Reserve inspired a broad-based rally earlier this month.
Hong Kong shares led the declines with a 1.3% fall from Tuesday's three-month high closing on worries of lower corporate earnings. Japan's Nikkei stock average shed 0.6 percent.
"The broad, underlying trend driving markets right now amid a lack of clear direction is that investors are not yet fully convinced about putting risk back on, so when markets rally, they take profits and they buy back when prices fall," said Kyoya Okazawa, head of equity and derivatives at BNP Paribas.
"Having said that, the eurozone's data yesterday actually bolstered the ECB's policy freedom as a slowdown in Germany reduces inflation pressures there. For markets, whether policy responses are coming through or not, is the key concern right now, rather than concerns about growth," Tokyo-based Okazawa said.
Markets will be watching the Jackson Hole meeting of central bankers and economists at the end of the month and the US nonfarm payrolls data due early in September, as well as the ECB's policy meeting early next month for signs of future policy actions, analysts said.
"Clearly the market seems to have a gentlemen's-style agreement with central bankers that things will be solved," said Chris Weston, a dealer at IG Markets in Melbourne. "Until September it's hard to see anything other than a continuation of the range-trading we are currently seeing," he added.
US retail sales rose 0.8% in July for the first time in four months for the largest gain since February, suggesting that households could drive faster economic growth in the third quarter after the second quarter's slowdown.
The eurozone's economy shrank 0.2% in the second quarter, falling prey to its prolonged debt woes while core economies Germany and France withstood contraction. But forward-looking German ZEW sentiment index slid for a fourth month running, clouding the outlook for the region's growth engine.
Strong US retail sales boosted oil, copper and the dollar but US stocks lost momentum on Tuesday, while European shares rallied as weak eurozone growth made the case for further policy moves to support recovery.
Copper firmed 0.1% to $7 427.50 a tonne while oil reversed course and fell after rallying on Tuesday.
Brent oil futures fell 0.3% to $113.68 a barrel from a three-month high on Tuesday while US crude also fell 0.3% to $93.11 after closing up nearly 1%.
Spot gold added 0.2% to $1 601.25 an ounce after falling as much as 1% the previous session when investors scaled back their expectations for the Fed's further easing following the solid US retail sales data.
The dollar was up 0.1% at ¥78.77, near its one-month high of ¥78.94 hit on Tuesday.
"The USD benefits from better US data (retail sales). For now, it is mostly USD/JPY trying to break higher as the back end of the US Treasury curves comes under pressure," said Sebastien Galy, senior currency strategist at Societe Generale in New York, in a research note.
He added that the euro is supported against the dollar as investors look for yield in European bonds. The euro steadied at $1.2324.
Japanese government bonds slipped on Wednesday, tracking declines in US Treasuries and German government bond prices on Tuesday, when uncertainty over whether the US data could still justify further easing by the Fed and the resilience of the German economy prompted investors to cut some safe-haven bids.
Okazawa at BNP Paribas said the recent gradual rise in safe-haven sovereign yields reflected money returning to equities.
Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index barely changed.