Tokyo - Asian shares and the euro paused from last week’s
rally on Monday as investors sweated on the progress of crucial Greek talks on
a debt swap deal to avoid a default, while activity was subdued due to the
Lunar New Year holiday in much of Asia.
Caution returned as Greece and private creditors struggled
to reach an agreement vital for restoring confidence in Europe’s refinancing
ability, and mixed US corporate earnings revived concerns over global growth
prospects and weighed on sentiment.
The MSCI’s broadest index of Asia-Pacific shares outside
Japan was barely changed from Friday, when it touched its highest in more than
two months to post a year-to-date rise of about 7.5%.
The pan-Asia index was dragged down by a sluggish Australian
stock market, where uncertainty over Greece prompted investors to reassess
positions after a 4.5% rally in the main share index so far this year.
Japan’s Nikkei average closed flat, after hitting a an
11-week high earlier on Monday.
Financial spreadbetters expected Britain’s FTSE 100,
Germany’s DAX and France’s CAC-40 to open around 0.1-0.3% higher. US stock
futures were down 0.3%.
A delay in the Greek debt deal helped US Treasuries nudge up
in Asia as investors sought safety, after optimism over Europe’s funding
problems had pushed the yield on 10-year US notes to a two-week high of 2.035%
on Friday.
With many Asian markets, including China, Hong Kong,
Singapore and South Korea, closed for the Lunar New Year holiday, the spotlight
turned to the Tokyo Commodity Exchange's (TOCOM) gold futures.
A near 1% rise in the benchmark December TOCOM gold futures
on Monday helped push cash gold up nearly 1 percent in thin trade, traders
said.
“Japanese investors may have found an incentive to buy with
the yen’s rapid appreciation against the dollar taking a pause, increasing the
value of their gold holdings in dollar terms,” said Akira Doi, a vice president
at commodity brokerage Daiichi Commodities Co in Tokyo.
The yen has stabilised around ¥77 since hitting a high of
¥76.30 versus the dollar on January 2, its highest since October 31, 2011,
when the Japanese currency rose to a record high of ¥75.31 against the dollar.
Spot gold was up 0.9% to $1 672 an ounce.
Euro pressured
The euro eased 0.3% to $1.2898, slipping from a
two-and-a-half week high around $1.2986 hit on Friday, which was up nearly 3%
from a 17-month trough near $1.2624 plumbed on January 13.
“There was no clear outcome on the talks about the
restructuring of Greek debt over the weekend and that’s probably pressured the
euro lower,” said Andrew Salter, strategist at ANZ in Sydney.
The single currency is likely to remain firmly capped as
speculators boosted net euro shorts to a fourth straight record in the week
ended January 17.
After several rounds of talks, Greece and private creditors
are converging on a debt swap deal that would stave off bankruptcy for Athens,
with investors shouldering losses of up to 70%. But many details were still
unresolved and the plan must be approved by the International Monetary Fund and
others.
Eurozone finance ministers will decide on Monday what terms
of a Greek debt restructuring they are ready to accept as part of a second
bailout package for Athens.
Rising hopes for progress in the eurozone debt crisis and
broader risks receding were highlighted by fresh money flowing into Europe Bond
and China Equity Funds. These posted their biggest weekly inflow in more than
two years, according to EPFR Global fund data on Friday.
The CBOE Volatility index VIX, which measures expected
volatility in the S&P 500 over the next 30 days, closed below 19 on Friday
for the first time since July 22, as a stabilising market reduced investor
desire to seek protection in stock index options against future losses.
Eurozone interbank lending rates and money market rates
continued their decline on Friday as a high level of liquidity injected by the
European Central Bank kept downward pressure on market rates. But banks
remained wary of lending to one another, choosing instead to park their excess
funds at the ECB.