Asian shares retreat from two-week highs

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5 per cent at 691.76, New Zealand's benchmark index dropped 0.9 per cent, while Nikkei was down 0.8 per cent

Shares in Asia retreated from two-week highs on Thursday and China started on the backfoot on concerns central banks were closer to considering winding back their emergency stimulus.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5 per cent at 691.76, still not too far from Wednesday's high of 696.76, a level last seen on May 10.

Shares in China started weaker with the blue-chip index off 0.2 per cent.

Australian shares were flat while New Zealand's benchmark index dropped 0.9 per cent, extending losses for a second day in a row after the country's central bank on Wednesday signalled rate rises from next year.

Japan's Nikkei was down 0.8 per cent. E-Mini futures for the S&P 500 were down 0.2 per cent.

Global equities markets have been supported by efforts from major central banks which have pumped trillions of dollars in financial markets since last year while reiterating their lower-for-longer interest rate stance as they seek to cast any inflation rise as temporary.

Earlier this week, US Federal Reserve Vice Chair Richard Clarida said he believed recent inflation pressures would prove to be largely transitory, though he did add that policymakers will be at a point to begin discussing tapering in upcoming meetings.

While the efforts by various Fed speakers appeared to have assuaged market concerns, doubt remains, said GSFM investment strategist Stephen Miller.

Clarida’s comments imply that the Fed may be a little bit more advanced than the 'not thinking about thinking' about monetary tightening that Chairman Jerome Powell characterised as the Fed’s stance last year - but only just a bit.

Overnight, the Fed Vice Chair for supervision, Randal Quarles, suggested that at some stage it will become important for the Fed to discuss plans to tighten its asset purchase programme.

What that means is that after a period where monthly inflation reports have largely been sidelined as a market focus, that they once again assume primacy they once enjoyed as the statistical report that matters, Miller added.