March 20, 2012 / 1:11 AM / in 6 years

Asian shares fall, led by China; euro steady

SINGAPORE (Reuters) - Asian shares slipped on Tuesday, dragged down by losses in Hong Kong and Shanghai, while the euro held near its highest level in a week after an orderly auction of Greek default insurance eased fears about the threat to the single currency posed by Greece.

A man looks at a stock quotation board outside a brokerage in Tokyo August 30, 2011. REUTERS/Toru Hanai/Files

Commodities were broadly weaker, with base and precious metals both edging down, while crude oil eased around half a percent on an improved supply outlook as Libyan exports are returning to pre-war levels faster than expected.

MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.5 percent, led by a fall of 0.8 percent in Shanghai stocks and a 0.7 percent decline for Hong Kong’s Hang Seng index. Tokyo markets were closed for a holiday.

“Momentum is clearly stalling right now and in need of distinct signals, whether it be U.S. housing data pointing to a stable recovery or stronger indications of policy easing in China,” said Kim Se-joong, an analyst at Shinyoung Securities in Seoul.

U.S. housing data is due at 1230 GMT on Tuesday.


The technology sector held up best, with an improving economic outlook in the United States supporting exporters such as Samsung Electronics, whose shares touched an all-time high.

The Asian tech sector was also bolstered by Apple Inc’s announcement of a $10 billion annual dividend and share buy-back, a move that lifted the S&P 500 to within 10 percent of its all-time closing high.

A steady stream of data pointing to a recovery in the U.S. economy and massive liquidity injections from major central banks have combined to drive a rally in share markets since late last year. The S&P 500 has risen nearly 12 percent in 2012 and the MSCI Asia ex-Japan is up more than 13 percent.

That, in turn, has stemmed the flow of money seeking safety in assets such as U.S. Treasuries, pushing yields on 10-year notes up to around 2.38 percent, the highest in nearly five months.

The dollar edged up 0.1 percent on Tuesday against a basket of major peers, while the euro held steady around $1.3230, after rising as high as $1.32659 on Monday.

“It’s probably going to be a consolidation week for the U.S. dollar,” said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

Investors began to scale back bearish bets, or short positions, against the euro on Monday and focused on a Greek credit default swap auction that set the payout for holders of CDS totaling about 3.2 billion euros. The auction fixed a fair value price of 21.5 cents on the euro for Greek bonds, within expectations.

That meant an owner of Greek CDS would be paid 78.5 cents on the euro, which analysts said was enough to compensate for the roughly 75 percent loss investors incurred on the country’s debt restructuring.

“There has been an unwinding of short euro positions because the reasons for holding those positions have not materialized,” said Douglas Borthwick, managing director of FX broker Faros Trading in Stamford, Connecticut.

Oil continued a decline that began on Monday on news that top exporter Saudi Arabia increased shipments in January and that Libyan production next month would return to levels seen before the civil war that ousted Muammar Gaddafi.

Brent crude and U.S. crude both fell 50 cents to $125.21 and $107.59 a barrel respectively.

Copper slipped 0.4 percent to $8,533 a tonne and gold also weakened, losing 0.2 percent to around $1,656.50 an ounce.

Additional reporting by Joonhee Yu in Seoul and Masayuki Kitano in Singapore; Editing by Richard Borsuk

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