* Weak U.S. data reduce likelihood of Fed rate hike in
* European markets expected to open flat to slightly lower
* Treasuries yield curve steepens to most in 2-1/2 months
* South Korea, China, Taiwan, Hong Kong closed for holidays
* Swiss National Bank, Bank of England hold rates steady
* Oil futures pull back after Thursday's surge
By Nichola Saminather
SINGAPORE, Sept 16 Asian stocks firmed on Friday
after weak U.S. data reduced already low expectations of an
interest rate increase by the Federal Reserve next week, sending
the Treasury yield curve surging to its steepest level in 2-1/2
Europe was poised for a more muted start, with financial
spreadbetters predicting Britain's FTSE 100 will open
down about 0.09 percent, while Germany's DAX and
France's CAC 40 were seen starting the day flat.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.4 percent, but was headed for a loss of
2.3 percent for the week.
Japan's Nikkei extended gains to close 0.7 percent
higher, but posted a weekly loss of 2.6 percent on worries about
the course of action the Bank of Japan will take at its policy
review on Sept. 20-21.
Australian shares ended the day up 1.1 percent,
posting a 0.8 percent loss for the week. South Korean, Chinese,
Taiwanese and Hong Kong markets are closed for holidays.
U.S. August retail sales and manufacturing output fell more
than expected, data on Thursday showed. The lacklustre reports
prompted the Atlanta Fed to lower its third-quarter gross
domestic product estimate to a 3 percent annual rate, from 3.3
"Anyone still left calling for a September hike next week
from the Federal Reserve must be feeling a bit hot under the
collar after further signs of economic vulnerabilities," Chris
Weston, chief market strategist at IG in Melbourne, wrote in a
"It's no surprise to see reasonable buying in the short- to
medium-duration U.S. Treasuries, while the longer end of the
curve hardly moved," he said.
The gap between five-year note yields and 30-year bond
yields widened to as much as 130.10 basis points
on Thursday, the steepest since June 27.
Futures traders are now pricing in a 12 percent chance of a
rate increase this month, down from 15 percent on Wednesday,
according to the CME Group's FedWatch tool. Friday's consumer
price inflation data is the next test for rates-focused traders.
Dwindling expectations of a rate hike helped boost U.S.
stock indexes between 1 percent and 1.5 percent on Thursday.
Wall Street also benefited from a 3.4 percent jump in Apple
shares, after the company said the first batch of its
new iPhone 7 Plus sold out globally.
The Fed will meet on the same dates as the BOJ, which will
unveil the results of a comprehensive review of its stimulus
programme after failing to reach its 2 percent inflation target.
The BOJ will consider making negative interest rates the
main focus of any future monetary easing at the review, sources
familiar with its thinking said earlier this week.
It is expected to maintain its base money target but
possibly change the mix of the assets it is buying, purchasing
more short-term bonds and fewer long-term ones in a bid to
steepen the yield curve.
"With inflation negative, a strong yen and modest growth we
expect the Bank of Japan to increase its Japanese government
bond purchases by 10 trillion yen, bringing the annual amount to
90 trillion yen," Sian Fenner, lead economist at Oxford
Economics, wrote in a note, adding that he does not expect a
further cut in rates.
"We also look for the BoJ to announce a change to the
composition of its asset purchases, with a focus on steepening
the yield curve," she said.
Few Japanese companies believe the central bank's aggressive
monetary stimulus will achieve its goal of spurring inflation, a
Reuters poll found, with firms citing negative fallout from the
programme more than positive effects.
On Thursday, the Swiss National Bank and the Bank of England
held interest rates steady.
The SNB warned that significant risks remain after sticking
with its ultra-loose monetary policy and currency intervention,
while the BOE said it is still likely to cut interest rates to
just above zero this year.
"While its minutes show the Bank of England is still willing
to wait and see if further easing is needed, should the expected
recession not materialise, monetary policy may need to reverse
sharply to prevent inflation building," Michael Metcalfe, head
of global macro strategy at State Street Global Markets, wrote
in a note.
In currencies, the dollar was little changed at 102.06 yen
after Thursday's 0.3 percent loss, and was heading for
a 0.6 percent decline for the week.
The dollar index, which tracks the greenback against a
basket of six major peers, also remained steady at 95.308, and
set to end the week little changed.
The euro <EUR=EBS was flat for both Friday and the week at
Oil prices pulled back on the resumption of exports from
Libya and Nigeria and worries that U.S. rig counts would
continue to rise. That followed gains on Thursday of as much as
2.5 percent as renewed risk appetite stemmed a two-day rout.
Brent crude slid 0.5 percent to $46.38 a barrel,
extending losses for the week to 3.4 percent. U.S. crude
retreated 0.6 percent to $43.66, poised to end the week down 4.8
Gold was steady after the resurgence in risk appetite pushed
it down 0.7 percent on Thursday. Spot gold was last
trading at $1,314.64 an ounce, down about 1 percent for the
(Reporting by Nichola Saminather; Editing by Shri Navaratnam
and Kim Coghill)