Reuters: US Dollar Report: GLOBAL MARKETS-Markets retreat on Greece bailout uncertainty

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GLOBAL MARKETS-Markets retreat on Greece bailout uncertainty May 9th 2012, 00:14 Tue May 8, 2012 8:14pm EDT * MSCI Asia ex-Japan eases down 0.1 pct, Nikkei opens down 0.8 pct * Euro pressured, Aussie near four-month lows By Chikako Mogi TOKYO, May 9 (Reuters) - Asian shares fell and the euro stayed pressured on Wednesday, as Greece struggled to form a government two days after elections, raising the risk that a hard-won bailout could be nullified. The uncertainty in Europe sent risk assets sliding across the board on Tuesday, with a broad measure of Greek stocks dropping 3.6 percent to close at its lowest level in almost 20 years, while European shares sank to a four-month closing low. Safe-haven assets were bid strongly, pushing benchmark German yields to a record low of 1.533 percent on Tuesday, but the weakness in the euro weighed on gold, which is often seen as a safe haven and has a close correlation with the single currency. It fell below $1,600 an ounce for the first time in four months. MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent, while Japan's Nikkei stock average opened down 0.8 percent. Greece's Leftist candidate for prime minister set conditions for a new coalition, demanding that pledges made in exchange for an European Union/International Monetary Fund bailout be torn up, which the biggest party said would destroy the country. If Greece does not stick to the aid package terms, it could run out of money as soon as next month, officials estimate. Analysts in Tokyo and Seoul expected Greece's political turmoil to hit blue chips which will spread to smaller firms. "The market as a whole will be in risk-aversion mode due to the problems in Greece," said Masayuki Doshida, a senior market analyst at Rakuten Securities, about the Nikkei. In Seoul, political uncertainty in Europe and receding hopes of further U.S. easing have stifled offshore liquidity inflows. "Blue chips will take a hit, but investors aren't likely to buy into small-caps either after a broadly lacklustre earnings season," said Ham Sung-sik, an analyst at Daishin Securities. Investors shunned commodity-linked currencies, sending the Australian dollar down to hover near a four-month low around $1.0088 hit on Tuesday. The euro was down 0.1 percent at $1.2994, not far from a three-month low of $1.2955 reached on Monday. "As long as political uncertainty continues, the Greek presence in the euro area in its current form could be seen to be at risk, in our view," said Bank of America Merrill Lynch in a research. Oil recovered from an overnight decline, with Brent June crude up 0.3 percent at $113.02 a barrel, after falling to a low of $110.53 on Tuesday. U.S. June crude was up 0.1 percent at $97.15 a barrel, rebounding from Tuesday's low of $95.52. Sentiment remained cautious in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index barely changed from Tuesday. Link this Share this Digg this Email Reprints

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