Shares, euro dip on Europe; French bond auction eyed

Friday, 6 January 2012 00:01 - - {{hitsCtrl.values.hits}}

TOKYO (Reuters): Asian shares and the euro eased on Thursday as concerns about the ability of euro zone countries to refinance their huge public debt dampened investor risk appetite ahead of a French bond auction later in the day.

The euro zone’s sovereign funding plans and U.S. economic data, including U.S. jobs figures due on Friday, are the primary focus for market participants to gauge whether investors would take or avert risk.

MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.3 percent after rising to its highest in nearly a month on Wednesday. Japan’s Nikkei stock average opened down 0.5 percent, after reaching a three-week high the day before.

U.S. stocks fared better than European peers, ending nearly flat on Wednesday after data showed new U.S. factory goods orders rose solidly in November while business capital spending cooled.

The FTSEurofirst 300 index of top European shares closed down 0.63 percent, dragged down by bank shares after Italy’s UniCredit SpA launched a 7.5 billion euro ($9.68 billion) rights issue at a huge discount on Wednesday.

The terms reflected the difficulty some European lenders are facing to raise capital to repair their weakened balance sheet, and could discourage other lenders from tapping the market and instead turn to further shrinking their assets, cut jobs or dividends.

“Europe still lacks a credible mechanism to rekindle growth, and without growth the crisis can only intensify,” said Russell Jones, analyst at Westpac Bank.

The euro eased 0.1 percent to around $1.2930 on Thursday, nearing a 2011 low of around $1.2856 hit on Dec. 29.

A break below that will take it back to levels not seen since September 2010. The euro stayed below 100 yen, not far above 98.71 yen hit on Monday, its lowest since late 2000.

France plans to raise up to 8 billion euros in long-term debt on Thursday but a key litmus test for investor confidence is next week’s debt sales by Spain and Italy, the two countries most exposed to the crisis.

This follows Wednesday’s 10-year German Bunds auction, which drew a subdued demand of bids amounting to 1.3 times the amount offered. But the result was a sharp improvement from a November sale which was one of the country’s least successful since the introduction of the euro and raised fears the debt crisis was spreading to the euro zone’s strongest economy.

On top of the euro zone debt crisis and its impact to the financial system, European shares and the euro may be weighed further by geopolitical risk as tension escalates between Iran and the West, which is forging a concerted Western campain to hold back Tehran’s nuclear programme.

On Wednesday, eroding investor confidence in euro zone’s funding efforts pushed industrial metals lower, sending London Metal Exchange (LME) three-month copper down 3 percent to close at $7,540 a tonne. Spot gold rose to a two-week high of $1,618.06 an ounce. Gold was steady at $1,611 on Thursday.

Brent February crude hit a seven-week high of

$113.97 per barrel on Wednesday, after European governments agreed in principle to ban imports of Iranian oil.

U.S. crude was down 0.1 percent to $103.13 a barrel on Thursday.

Asian credit markets were subdued early on Thursday, with spreads on the iTraxx Asia ex-Japan investment grade index barely changed.