GLOBAL MARKETS-Asian shares capped by Spain, Greece debt jitters

by on September 27, 2012 12:25 am BST

Wed Sep 26, 2012 8:25pm EDT

* MSCI Asia ex-Japan pressured, Nikkei opens down 0.6 pct

* Euro near 2-week low vs dollar, yen near 1-week high vs

By Chikako Mogi

TOKYO, Sept 27 (Reuters) – Asian shares were capped on
Thursday as uncertainty over a bailout for Spain bailout dented
sentiment, while global lenders’ wrangling over Greek debt
restructuring highlighted Europe’s apparent difficulty to reach
a unified approach to tackling its debt crisis.

The MSCI index of Asia-Pacific shares outside Japan
was nearly unchanged, after hitting its lowest
point since Sept. 14 on Wednesday.

The index has almost wiped out all the gains made after
markets rallied on the U.S. Federal Reserve’s new QE3
job-boosting stimulus.

Australian shares inched down 0.1 percent and South
Korean shares eased 0.4 percent.

“Foreign investors’ diminishing risk appetite and increased
sell orders from equity funds have weighed on the index,” said
Lee Sun-yup, an analyst at Shinhan Investment Corp, of the Korea
Composite Stock Price Index (KOSPI).

Japan’s Nikkei stock average opened down 0.6 percent
to hit a fresh two-week low.

As protestors against severe austerity measures took to the
streets and clashed with police in Spain and Greece, European
equities saw their worst day in two months, while the euro hit a
two-week low against the dollar and Spanish 10-year bond yields
rose back above 6 percent.

Spanish 10-year yields had held below 6 percent since the
European Central Bank said on Sept. 6 it would buy sovereign
bonds of euro zone states which request a bailout, aiming to
trim borrowing costs.

“The recent dose of central bank support has kept broader
markets well-behaved for the time being,” Barclays Capital said
in a note.

“The announcement of detailed stress test results, the 2013
budget, and a structural reform package from the Spanish
government are expected before the end of the week. These will
be crucial in determining whether the current episode
intensifies or not,” it said.

Spanish Prime Minister Mariano Rajoy presents his 2013
budget on Thursday, while gradually moving towards seeking a
sovereign bailout, which would activate the ECB’s bond-buying
scheme to help calm market jitters.

On Friday, Moody’s is expected to publish its latest review
of Spain’s credit rating. An independent audit of Spain’s banks
will on the same day reveal a stress test showing how much money
Madrid will need from a 100 billion euro ($130 billion) aid
package that Europe has already approved for the banks.

Greece’s international lenders remained divided over how to
approach Athens’ debt restructuring as creditors seek to
minimise losses on their exposure.

The euro traded at $1.2878, not far from a two-week
low of $1.2835 touched on Wednesday.

The yen was at 77.67 yen, staying near a one-week
high of 77.585 hit on Wednesday.

The dollar index measured against a basket of
currencies eased 0.1 percent to 79.793, off a two-week high of
80.012 reached on Wednesday, which weighed on dollar-denominated
industrial commodities such as oil and copper, also pressuring
safe-haven gold.

As investor risk aversion grew, the CBOE Volatility index
, a gauge of expected volatility in the Standard & Poor’s
500 index, jumped 8.94 percent on Wednesday for its
biggest daily increase in 2-1/2 weeks, after rising to a
three-week high.

The Bank of Korea said on Thursday the manufacturing
business outlook index for October was marginally above the
outlook level in August which was the worst in three years, as
companies struggled with anaemic domestic demand and rising
global raw material prices.

U.S. chief executives’ view of the economy deteriorated
sharply in the third quarter and is now as bleak as it was in
the immediate aftermath of the last recession, according to a
survey released by the Business Roundtable on Wednesday.