GLOBAL MARKETS-Asia muted, hopes European stocks stabilise
* Asia share index dips, regional markets mixed
* Signs European equities could steady after selloff
* Yen, safe-haven bonds keep mild bid on Portuguese bank troubles
* Mood cautious as U.S. earnings season gets under way
By Wayne Cole
SYDNEY, July 11 (Reuters) - Most Asian share markets slipped on Friday and safe haven assets stayed in demand as investors waited to see how European stocks responded to the latest outbreak of banking jitters in the region.
Early signs were that markets might stabilise after sharp falls on Thursday triggered by concerns about the financial health of Portugal's top listed lender.
Financial spreadbetters predicted the FTSE 100, DAX and CAC 40 would all start 0.2 percent to 0.3 percent higher. The S&P 500 EMini contract was holding steady so far.
Moves in Asia had been generally modest with markets mixed across the region. Hong Kong, South Korea, Taiwan and the Philippines lost ground but China, Singapore and Australia eked out gains.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3 percent, while Japan's Nikkei pared losses to end off 0.3 percent.
Investors were encouraged by signs that funds were taking money out of peripheral euro zone debt and seeking higher returns in the emerging world. It was notable that MSCI's index of emerging market stocks actually rose on Thursday having hit a 17-month peak earlier in the week.
European stocks had been buffeted as trading in Banco Espirito Santo was halted after a 19 percent drop. The bank's largest shareholder suspended trading in its own shares and bonds due to "material difficulties" at its own largest shareholder.
Late on Thursday, the bank said losses on loans to the troubled business empire of its founding family will not put it at risk of running short of capital.
The damage was amplified by data showing unsettlingly weak readings for May industrial production in France and Italy. These followed equally disappointing numbers from Germany and the UK, which has led many analysts to cut their estimates of economic growth for the second quarter.
A YEN FOR SAFETY
While the fate of a relatively minor bank in Europe would not normally have had much effect on Wall Street, it was enough to make investors reconsider the market's high valuations as the earnings season gets into full swing.
The S&P 500 index fell 0.4 percent, while the Dow eased 0.4 percent and the Nasdaq 0.5 percent.
The S&P 500 financial sector index fell 0.5 percent and Wells Fargo & Co, which reports earnings later on Friday, lost 0.7 percent.
With stocks off the boil, Treasuries picked up the usual safe-haven bid for shorter-term debt which is prized for its deep liquidity. Yields on two-year notes were down at 0.456 percent, a marked reversal from a high of 0.5360 percent hit just on Wednesday.
German debt played much the same role in Europe, where yields on 10-year bunds were at a 14-month trough of 1.20 percent. Bonds in the euro zone periphery were not so lucky, as yields on Portuguese, Spanish and Italian bonds had all risen sharply on Thursday.
The itch for safety benefited the Japanese yen, which climbed a full yen to 137.76 per euro. The dollar initially dropped as far as 101.04 yen but then slowly wended its way back to 101.29.
The higher-yielding Australian and New Zealand dollars also remained well supported, suggesting there was no widespread retreat from risky assets.
In commodities, gold was up at $1,337.70 having touched a 3-1/2-month top of $1,345.00.
Oil prices came under pressure again after a brief bounce on Thursday. Brent was off 7 cents at $108.60 a barrel, while U.S. crude lost 19 cents to $102.74.
Tensions in the Middle East continued to simmer with Israeli officials seeming to hint at a possible assault on Gaza by ground forces. (Editing by Jacqueline Wong & Kim Coghill)
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