Asian shares slip as investors lock in gains from 2019 rally

Asian shares were mostly lower on Tuesday, in their last trading day of the decade as investors locked in profits after a buoyant year of gains, driven in recent weeks by hopes of an imminent U.S.-China trade deal.

European equity markets were expected to follow suit after losses on Wall Street Monday. FTSE futures FFIc1 were down 0.37% at 7,508.

But U.S. stock futures showed some optimism ahead of Wall Street's final session of the year, with S&P 500 e-minis ESc1 up 0.12% at 3,227.3.

At about 0620 GMT, MSCI's broadest index of AsiaPacific shares outside Japan was 0.46% lower, set for its weakest performance since Dec. 4. For the month, the index is still up 5.6%.

The index has gained nearly 16% this year, a sharp turnaround from a 16.2% drop last year but lagging a 23.8% yearto-date gain in MSCI's global share index. The Asian index gained 33.5% in 2017, about the same as its total rise over the previous decade.

Australian shares ended their best year since 2009 1.78% lower, and Hong Kong's Hang Seng .HSI finished down 0.46% in a half-day session.

"We are seeing some profit-taking into year-end," said Ryan Felsman, senior economist at CommSec in Sydney, adding that progress on resolving the 17-month-long U.S.China trade war remained a positive factor for investors into the new year. The White House's trade adviser said the U.S.-China Phase 1 trade deal would likely be signed in the next week, but said confirmation would come from President Donald Trump or the U.S. Trade Representative.

"We think that the global growth situation is improving, we're seeing better industrial profits in China ... green shoots in the manufacturing sector on the back of an improvement in the trade situation is a key catalyst going forward," he said.

While easing trade concerns and lifting uncertainty around Britain's exit from the European Union have helped reduce some near-term market uncertainty, investors remain worried about a recession, seen as inevitable in the new decade.

Positive Chinese manufacturing data, which showed factory activity expanding for a second straight month in December, nudged China's blue-chip index .CSI300 0.3% higher, extending the more-than-33% gain seen this year.

China's gains built rally, which was driven by a combination of strong retail sales growth and hopes that a new benchmark for floating-rate loans could lower borrowing costs. Markets in Japan and South Korea were closed for a holiday.

The falls in Asia came after profit taking pushed the Dow Jones Industrial Average .DJI down 0.64% to 28,462.14, the S&P 500 .SPX 0.58% lower to 3,221.29 and the Nasdaq Composite . IXIC off 0.67% to 8,945.99. U.S. Treasury futures inched lower, reflecting an implied yield of 1.81%. That followed a rise in benchmark U.S. Treasury yields that pushed the U.S. two-year, 10-year yield curve to its steepest in 14 months. The dollar continued to weaken against the yen for a third straight session, dropping 0.20% to 108.65 JPY= and hitting its lowest level since Dec. 12. The euro strengthened EUR= 0.06% to buy $1.1204.

The dollar index, which tracks the greenback against a basket of six major rivals, was 0.05% lower at 96.692.