TOKYO Tech-heavy South Korean shares led the broader Asian share index lower on Monday on fears of weaker earnings, but improving economic prospects in Europe and solid U.S. profit reports underpinned sentiment.
Gold languished near two-week lows and was capped as the improving global macroeconomic environment has curbed interest in safe haven assets.
"Investors would rather move their money into equities or bulk commodities from safe-haven assets," said Li Ning, an analyst at Shanghai CIFCO Futures.
European markets were seen edging higher, with financial spread-betters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open up as much as 0.3 percent. U.S. stock futures were up 0.1 percent, hinting at a firm Wall Street start.
The MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4 percent, dragged lower by a 1.9 percent plunge in its technology sector. Among the regional equities markets, only Seoul and Jakarta, which stayed near its lifetime highs, were in the red.
The Korea Composite Stock Price Index extended losses to close down 0.4 percent after touching an 8-week low, as a weakening yen soured the outlook for local exporters and foreign investors reduced their holdings.
Tech heavyweight Samsung Electronics (005930.KS) shed 3.2 percent to a 10-week low, exposing the industry's vulnerability to a clouding outlook for high-end smartphone device shipments
"Concerns about South Korean tech firms' fundamentals have increased, with high-end smartphone device shipments expected to slow down this year," said Park Young-joo, an analyst at Woori Investment & Securities.
Global investor sentiment improved on Friday as a rise in the German Ifo business morale index gave further evidence for Europe's largest economy picking up speed, and European banks were to repay the European Central Bank a larger sum of money than expected to highlight a stabilising euro zone financial system.
In China, data on Sunday showed profits earned by industrial companies rose 17.3 percent in December from a year earlier to 895.2 billion yuan, adding to evidence of a fourth-quarter economic recovery.
Spot gold steadied around $1,659.90 an ounce on Monday, still below its 200-day moving average.
U.S. crude inched up 0.2 percent to $96.09 a barrel and Brent steadied around $113.27.
London copper, another industrial commodity linked to demand prospects, rose 0.4 percent to $8,061.25 a tonne.
YEN UNDER PRESSURE
The yen extended losses to fresh lows earlier in the session, but Japanese equities gave up morning gains ahead of Japan's corporate reporting season, which enters full swing this week.
Japan's Nikkei stock average closed down 0.9 percent after briefly striking a fresh 32-month high above 11,000 in the morning. It jumped 2.9 percent on Friday to log an 11th straight week of gains, its longest such run since 1971.
Against the yen, the dollar hit 91.26 early on Monday, its highest level since June 2010 while the euro touched 122.91, its highest point since April.
Analysts estimate that a one-yen decline against the dollar is worth around a 1 percent increase in combined recurring profits at all listed Japanese firms. Of total estimates for companies, there are more analysts' upgrades than downgrades.
New Prime Minister Shinzo Abe has called for aggressive monetary easing and huge fiscal spending to beat deflation. The yen has fallen some 13 percent since mid-November when he began making those calls as part of his election campaign.
"The potent mix of Abenomics and strong risk appetite abroad is continuing to soften the yen, which means investors will still be buying stocks," said Masayuki Doshida, senior market analyst at Rakuten Securities.
In sharp contrast to U.S. and German equities, the Nikkei remains well below levels before the financial crisis in 2008, reflecting the magnitude of negative effect from the yen's strength. The benchmark Standard & Poor's 500 Index closed at its highest in more than five years on solid U.S. corporate earnings on Friday and Frankfurt's DAX index also scaled five-year highs.
The yen is stronger than around 105 to the dollar before the 2008 financial crisis, but the euro hovers well below the pre-crisis levels. The Korean won is weaker against pre-Lehman levels against both the dollar and the yen.
Investors will focus this week on the Federal Reserve's Open Market Committee statement on Wednesday and U.S. nonfarm payrolls due on Friday.
Sluggish equities weighed on Asian credit markets, widening the spread on the iTraxx Asia ex-Japan investment-grade index by 1 basis point.
(Additional reporting by Joyce Lee in Seoul, Sophie Knight in Tokyo and Rujun Shen in Singapore; Editing by Kim Coghill and Richard Borsuk)