Asian shares pressured by geopolitical tension

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IOL pic july29 market arrows . Photo: Filomena Scalise

Tokyo - Steep weekly falls on Wall Street pressured Asian shares on Monday, as concerns over geopolitical tensions and Argentina's debt default eclipsed US economic data that argued against an earlier start to the Federal Reserve's rate-tightening cycle.

Japan's Nikkei average fell 0.4 percent while MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.05 percent.

Investors were cautious after the U.S. S&P 500 lost 2.7 percent last week, its biggest weekly decline since the week ending June 1, 2012, hitting two-month lows.

European shares, which have been weighed down for months on concerns over U.S. fines on some of the major European banks as well as problems at the biggest bank in Portugal, fell to 4 1/2-month lows on Friday.

Portugal announced on Sunday a plan to spend 4.9 billion euros ($6.58 billion) to rescue Banco Espirito Santo - a setback for the country just months after it emerged from a 78 billion euros, three-year bailout financed by the European Union (EU) and the International Monetary Fund (IMF).

Argentine's debt default last week also added to the gloom, even though it has so far had limited spillover to any other emerging markets.

The persistent tensions in the Middle East and Ukraine rounded out a tough week of trading for global markets last week, and took the edge off Friday's US employment report which reduced expectations of an earlier-than-expected start to the Fed's rate-hike cycle.

Job growth slowed in July to 209 000 last month after surging by 298 000 in June, slightly below economists' forecast of a 233 000 job gain.

Still, July marked the sixth straight month employment expanded by more than 200 000, a signal of strength last seen in 1997, pointing to a solid recovery in the US economy.

US Treasury debt prices rose as traders trimmed bets the Fed would push rates up in the first half of next year.

The rate-sensitive two-year notes yield fell more than five basis points to around 0.476 percent. The 10-year yield also dropped to 2.500 percent, off three-week high of 2.614 percent, hit on Thursday.

As US debt yields fell back, the dollar took a breather, with its index against a basket of major currencies off a 10-1/2-month high hit on Thursday.

“The July jobs data won't change the Fed's benign stance as it was about as “goldilocks” as it could be,” said Shane Oliver, Head of Investment Strategy at AMP Capital in Sydney.

The dollar index stood at 81.301, down from Thursday's high of 81.573.

The euro fetched $1.3429, little changed in early trade but off last week's 8-month low of $1.3366. The dollar stood at 102.53 yen, down from 103.15 yen, a four-month peak hit on Wednesday.

Oil prices were under pressure with US crude futures trading just above its six-month low hit on Friday, as oversupply in the Atlantic basin and low demand outweighed worries over political tensions in the Middle East, North Africa and Ukraine. - Reuters


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