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Asian shares, euro fall on uncertainty over Greek bailout

Data today showed Japanese exports fell 6.5 per cent in October from a year ago. ― Reuters picData today showed Japanese exports fell 6.5 per cent in October from a year ago. ― Reuters picTOKYO, Nov 21 — The euro skidded today and Asian shares fell after European officials failed to reach a deal on another bailout for Greece, a day after Federal Reserve Chairman Ben Bernanke highlighted the dangers of a US fiscal crisis. US stock futures eased 0.4 per cent, pointing to a weak Wall Street open.

Financial spreadbetters predict London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX would open down as much as 0.2 per cent, following weakness in Asia.

The euro slumped 0.5 per cent to US$1.2752, extending losses and retreating from Tuesday’s two-week high of US$1.28295.

The euro’s decline lifted the dollar up 0.3 per cent against a basket of key currencies and weighed on commodities such as gold, which eased 0.3 per cent to US$1,722.70 (RM5.166) an ounce.

Euro zone finance ministers and Greece’s international lenders will gather again on Monday. Their meeting in Brussels ended today without an agreement on the next tranche of loans to Greece, as they haggled over myriad options on how to bring the country’s debt down to a sustainable level, without which emergency aid cannot be disbursed to Athens.

“The euro is being sold because markets had believed the ministers would agree on aid for Greece at today’s meeting,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

“Instead, a settlement is postponed, highlighting the difficulty of getting consensus on the debt crisis. But I feel this is a typical European political show and an agreement will be reached.”

The bearish news from Europe dragged down Asian shares, whose two-day rise had already been stalled after Bernanke yesterday repeated a warning that failure to avoid the US$600 billion “fiscal cliff” in expiring tax cuts and government spending reductions could lead to recession in the United States.

The Fed chief said worries over how budget negotiations will be resolved were already damaging growth.

Concerns about the United States failing to raise its debt ceiling rattled financial markets in August 2011 and prompted Standard & Poor’s to cut the top-notch US government bond rating for the first time ever.

“The price action suggests market participants are unclear of what to make of recent developments and therefore this warrants some caution,” said Stan Shamu, strategist at IG Markets.

But Hirokazu Yuihama, a senior strategist at Daiwa Securities, said that for all the concerns over the fiscal cliff, most of the market expected the US Congress and White House to reach a compromise to avert the crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent. Hong Kong shares bucked the falling trend but pared earlier gains to rise 0.5 per cent while Shanghai shares inched up 0.3 per cent.

Japan’s Nikkei stock average closed up 0.9 per cent at a two month-high as exporters were buoyed by a weaker yen.

The yen has come under pressure on expectations that a general election on December 16 will result in victory for an opposition leader who wants the Bank of Japan to aggressively ease monetary policy to stem the economy from further deterioration.

Daiwa’s Yuihama said concerns over third-quarter earnings have subsided as most Asian companies had already reported results.

“This has prompted investors to turn to economic fundamentals. Signs of recovery in the US and China are offering some assurances that the global economic slump may not be as severe as previously feared, even if growth remains fragile,” Yuihama said.

Investors will now focus on HSBC China flash PMI for November due tomorrow to see whether a low point for China, the world’s second largest economy, is over. US manufacturing figures are due later today while those from Europe are due tomorrow.

Trading activity was slowing ahead of the US Thanksgiving long weekend.

Going into the holiday, the dollar has been underpinned broadly by data indicating a moderate US recovery taking root, while the yen remained under pressure, with more data showing Japan’s economy struggling.

Japan’s exports fell 6.5 per cent in October from a year ago, dropping for a fifth consecutive month, weighed down by weakening global demand and a territorial row with China, its main customer.

In the US yesterday, a report showed housing starts rose to the highest rate in more than four years in October.

The dollar rose to a 7-1/2-month high against the yen of 81.975 yen while the euro briefly touched a peak of 105.05 yen, its highest point since May 4.

A retreat in shares dragged oil lower, although prices remained supported by a lack of ceasefire between Israelis and Palestinians, which raised concerns about supply disruptions from the Middle East.

US crude futures pared earlier gains and were up 0.1 per cent to US$86.85 a barrel by midafternoon, and Brent crude also trimmed earlier rises and was up 0.2 per cent at US$110.03.

Weak appetite for riskier assets also interest in Asian credit markets subdued, with the spreads on the iTraxx Asia ex-Japan investment-grade index tightening by 1 basis point. — Reuters

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