* China shares dip, though off lows, while Aussie skids
* Investors weigh Trump's budget proposal
* Fed minutes awaited for monetary policy clues
TOKYO, May 24 Chinese stocks fell and the
Australian dollar skidded on Wednesday after Moody's downgraded
its sovereign credit rating on China, adding to worries about
the global impact of slowing growth and rising debt in Asia's
Shares elsewhere in Asia also slipped, with MSCI's broadest
index of Asia-Pacific shares outside Japan down
0.3 percent, despite modest gains on Wall Street overnight.
Financial spreadbetter CMC Markets expected Britain's FTSE
100 to open slightly higher, Germany's DAX to
start the day little changed, and France's CAC 40 to
Japan's Nikkei stock index managed to end 0.7
"At the end of the day, overseas investors had been taking a
cautious stance toward China, even before this, so it was not
entirely surprising to the street," said Kyoya Okazawa, head of
global markets, Japan at BNP Paribas Securities in Tokyo.
The move would likely have only a short-term market impact,
The Australian dollar, regarded as a proxy for China due to
the country's status as a major trading partner, was down 0.4
percent at $0.7450 after falling as low as $0.7439
after the Moody's announcement.
The offshore yuan slipped, but later recouped its
losses. The Shanghai stock index also was off earlier
lows but was still down 0.6 percent, while the blue-chip CSI300
index shed 0.4 percent.
Moody's cut China's rating by one notch to A1 from Aa3 in
its first downgrade of the country in nearly 30 years, saying it
expects the financial strength of the economy will erode in
coming years as growth slows and debt continues to
China's massive debt has been at the centre of concerns
among economists and Beijing is walking a fine line as it tries
to contain financial risks.
Moody's has no specific timetable for re-visiting China's
rating but will monitor conditions on a regular basis, Marie
Diron, associate managing director of Moody's Sovereign Risk
Group, told Reuters. She said the risks to China's financial
system were "broadly balanced."
China's finance ministry said the downgrade by Moody's was
based on inappropriate methodology, saying it was exaggerating
difficulties facing the economy and underestimating reform
The downgrade would probably not have a much broader
spillover impact on global financial markets, said Suan Teck
Kin, economist for United Overseas Bank in Singapore, noting
that Moody's forecasts for China's economic growth seemed "too
Chinese authorities have stepped up regulatory curbs in
recent months to defuse financial risks and have cracked down on
risky lending practises, with the central bank moving toward
tighter policy. But the steps have been largely cautious to
avoid braking economic growth too sharply.
The U.S. dollar pulled away from recent 6-1/2 month lows as
investors pored over President Donald Trump's first full budget
Containing no major surprises, the plan called for an
increase in military and infrastructure spending but also cuts
to social spending in areas such as healthcare and food
U.S. Treasury Secretary Steven Mnuchin said he hoped to get
tax reform passed this year, though this would not happen by
"Of course we're not really sure of the details of the
budget plan, and what form it will finally take, but it has
given the market the perception that everything is moving
forward again, after recent distractions such as 'Russia-gate',"
said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange
strategist for Daiwa Securities.
Political turmoil following Trump's recent firing of FBI
Director James Comey, who was overseeing an investigation into
possible links between the president's election campaign team
and Russia, had raised fears that his administration's promised
tax reform and fiscal stimulus would be derailed.
Investors also were awaiting the minutes of the U.S. Federal
Reserve's latest policy meeting, scheduled to be released at
1800 GMT on Wednesday.
"Expectations that the Fed will hike next month are also
supporting the dollar. Though a hike is not a done deal, it is
still widely expected," Imaizumi said.
Fed funds futures suggested traders saw a nearly 80 percent
chance that the U.S. central bank would raise rates at its June
meeting, according to CME Group's FedWatch program.
The dollar index, which tracks the greenback against a
basket of six major rivals, edged up 0.1 percent on the day to
97.456, pulling away from its lowest levels since
November plumbed earlier this week.
The dollar added 0.1 percent against the yen to 111.90
, while the euro was down 0.1 percent on the day at
Oil prices modestly extended gains after rising in the
previous session on expectations of an extension to OPEC-led
U.S. crude was up 0.2 percent on the day at $51.55
per barrel, while Brent crude futures were also up 0.2
percent at $54.27.
Spot gold slipped 0.2 percent to $1,248.65 an ounce.
(Reporting by Tokyo markets team; Editing by Shri Navaratnam,
Eric Meijer and Kim Coghill)