Asian Shares Wilt As Worry Over Greece Saps Risk Appetite

Asian shares fell on Tuesday as a stronger dollar fueled a further selloff in commodities, and as political uncertainty in Greece made investors less willing to take risks in the final trading days of 2014

Some of the gloom was likely to spread to European bourses. Financial spreadbetter IG expected Britain’s FTSE 100 to open 0.4 percent lower, while Germany’s DAX and France’s CAC 40 were both seen opening down 0.2 percent

Activity was thin ahead of the New Year’s holiday, with many traders having closed out positions. Japanese markets will be shut from Wednesday to Friday, reopening next Monday.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down about 0.8 percent on the day, and off less than 1 percent for the year

Japan’s Nikkei stock average shed 1.6 percent on its final day of 2014 trading, but still gained 7.1 percent this year. With reflationary policies of the Bank of Japan and Prime Minister Shinzo Abe set to continue in 2015, many investors maintained a bullish outlook.

“The new year will be very positive, with stocks boosted by likely additional easing by the BOJ and corporate earnings growth,” predicted Takashi Hiroki, chief strategist at Monex, Inc.

On Wall Street, the Dow Jones industrial average ended slightly lower, while the S&P 500 and the Nasdaq Composite managed to eke out modest gains despite concerns about Greece’s political woes.

Prime Minister Antonis Samaras failed to get enough support for his presidential nominee on Monday, and will call a national election for Jan. 25.

The election could open the way for Greece’s Syriza party to come to power. It wants to wipe out a big part of the country’s debt and cancel the terms of the bailout Athens received from the European Union and International Monetary Fund.

Developments in Greece weighed on the euro, which fell to a fresh low of $1.2123 on the EBS trading platform, its lowest since mid-2012. It was last down about 0.2 percent on the day at $1.2131, and was on track to lose more than 11 percent this year.

“Our bearish view on EUR/USD rests on the assumption that monetary policy settings on both sides of the Atlantic are likely to diverge markedly next year,” strategists at UBS wrote in a note to clients.

“That remains the case, but now we believe the return of political uncertainty to Greece could trigger an acceleration of the euro’s downtrend over the next two months,” UBS said.

Recent solid data has reinforced the view that the U.S. economy is improving enough for the Federal Reserve to consider raising interest rates in mid-2015. That would be in contrast to the still-sluggish economies of the euro zone and Japan, where central bankers are likely to continue monetary easing.

Against its Japanese counterpart, a perennial market favorite in times of risk aversion, the dollar slipped about 0.3 percent to 120.31 yen. But it remained up more than 14 percent for this year, and not far from a 7-1/2 year high of 121.84 hit earlier this month.

Despite the greenback’s weakness against the yen on Tuesday, the dollar index, which tracks the U.S. unit against a basket of rival currencies, added about 0.1 percent to 90.277 after rising as high as 90.325, its highest level since April 2006.

The dollar’s general strength continued to pressure commodities, which are priced in dollars and therefore become more expensive and less appealing to holders of weaker currencies.

Copper edged down about 0.1 percent on the day on Tuesday to $6,280.25 a tonne, after falling to its lowest level in four-and-a-half years this week on concerns about the strong dollar and China’s slowing economy.

Oil futures erased early gains and extended sharp overnight losses as persistent worries about a global supply glut offset concerns about output disruptions in Libya.

U.S. oil futures slipped 0.9 percent to $53.12 a barrel after shedding 1.9 percent on Monday. Brent crude dropped 1 percent to $57.30 after hitting 5-1/2-year low.

An industry group, the American Petroleum Institute, is scheduled to release its inventory report later in the day, while the U.S. Department of Energy’s Energy Information Administration will release its data on Wednesday.

“A potential surprise draw in U.S. oil stocks would give a short-term fillip to the upside,” said Michael McCarthy, chief market strategist at Sydney’s CMC Markets.

Source : Reuters