Asia stocks rally peters as Trump budget disappoints

Asian markets struggled Friday as caution prevailed following the previous day's rally, with investors concerned about a lack of detail on Donald Trump's tax reforms and spending promises in his first budget.

The tepid increases came a day after the Federal Reserve's rate hike and signal of a slower pace of future rises sparked a surge across equities and sent the dollar tumbling.

The greenback struggled to recover from that sell-off, with the pound and euro holding onto their gains, while a stronger yen further dented Japanese exporters, in turn dragging the Nikkei index down.

On Wall Street the Dow and S&P 500 both retreated on disappointment with Trump's controversial budget proposal, which was filled with big defence spending and cuts to education and environmental projects.

However, it lacked any detail on his pledge to slash taxes and ramp up infrastructure spending, with analysts saying there is a fear that ongoing acrimony on his health policy could mean the growth-firing measures will not come as soon as hoped.

"There is little doubt that Trump continues to tick off his list of promises," Greg McKenna, chief market strategist at AxiTrader, said in a note. "But it's becoming clear that the stimulus part of Trumponomics might be delayed behind other imperatives."

"Traders are likely to be disappointed that they still haven?t seen the meat on the bones of the tax proposals and infrastructure spending plans in this 'skinny budget'. It helps explain why yesterday?s Fed sugar hit hasn?t continued today."

- Pound holds gains -

Hong Kong enjoyed late buying to end up 0.1 percent, following a more than two percent jump Thursday, while Shanghai suffered heavy selling in the afternoon to end one percent lower.

Sydney added 0.2 percent and Seoul put on 0.7 percent while Singapore edged 0.2 percent higher.

Taipei and Manila were also higher, while Jakarta touched a record high in intra-day trade as emerging markets were boosted by the prospect US rates will not rise as quickly as expected. Higher US borrowing tends to hurt emerging markets as it lead investors to withdraw cash from the country to seek better returns.

"A less hawkish monetary policy in the US is more likely to push assets outside of the US into higher-risk, higher-return markets," James Woods, a Sydney-based investment analyst at Rivkin Securities, told Bloomberg News.

"A weaker dollar is supportive of those emerging markets generally." However, he cautioned that the gains could be reversed in time as focus shifts back to the next rate hike.

Tokyo ended the day 0.4 percent lower but Toshiba soared five percent on reports the Japanese government is mulling using state money to support the company's plans to spin off its memory chip business.

However, the company is still under intense pressure as it struggles with huge losses at its US nuclear unit Westinghouse Electric and probes claims of misconduct by senior executives there. The Tokyo Stock Exchange has put Toshiba "under supervision", meaning it faces being delisted.

On currency markets the pound maintained Thursday's charge that came after minutes showed Bank of England policymakers were gravitating towards a possible interest rate hike, surprising traders. Sterling was flat at $1.2350, having jumped from around $1.2280 in London.

Traders will be keeping an eye on a G20 finance ministers' meeting in Germany this weekend, as worries grow over Trump's isolationist slant, while the US president is due to hold talks with German Chancellor Angela Merkel later Friday.

In early European trade London and Paris each lost 0.1 percent and Frankfurt shed 0.4 percent.

- Key figures around 0800 GMT -

Tokyo - Nikkei 225: DOWN 0.4 percent at 19,521.59 (close)

Hong Kong - Hang Seng: UP 0.1 percent at 24,309.93 (close)

Shanghai - Composite: DOWN 1.0 percent at 3,237.45 (close)

London - FTSE 100: DOWN 0.1 percent at 7,410.19

Euro/dollar: UP at $1.0775 from $1.0771

Pound/dollar: DOWN at $1.2350 from $1.2358

Dollar/yen: UP at 113.40 yen from 113.26 yen

Oil - West Texas Intermediate: UP nine cents at $48.84 per barrel

Oil - Brent North Sea: UP four cents at $51.78 per barrel

New York - Dow: DOWN 0.1 percent at 20,934.55 (close)