* MSCI Asia ex-Japan tumbles, tracking overnight slump in
* Greece clinches austerity approval, euro stays pressured
* Safety bids underpin yen, dollar index, US Treasuries
* European shares likely rebound
By Chikako Mogi
TOKYO, Nov 8 Asian shares extended losses on
Thursday as investors worried about a looming budget crisis in
the United States, underpinning the safe-haven dollar and yen as
well as U.S. Treasuries on safety bids.
U.S. stock futures were up 0.4 percent, however,
pointing to a recovery when Wall Street opens after all major
U.S. stock indexes slumped over 2 percent overnight.
European shares were also seen rebounding from the previous
day's sharp losses, with financial spreadbetters expecting
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX to open as much as 0.6 percent
MSCI's broadest index of Asia-Pacific shares outside Japan
slid 1.2 percent, retreating from a near
eight-month high on Wednesday, and looked set for its biggest
one-day percentage drop in seven weeks.
South Korean shares and Hong Kong shares led
the declines while Australian shares fell 0.7 percent,
of lows after local October employment figures topped forecast.
Japan's Nikkei average fell 1.7 percent to a
The benchmark U.S. 10-year Treasury yield stood
at 1.68 percent in Asia, after ending down 11 basis points at
1.6246 percent for its biggest single-day drop since May 30 on
Wednesday when stock markets tumbled. Japanese government bonds
also rallied, pushing 10-year yields down to a
seven-month low of 0.750 percent.
"Uncertainty over the fiscal cliff is likely to support
bonds," said Shinichiro Kadota, non-yen fixed income analyst at
Barclays in Tokyo.
U.S. politicians are facing a "fiscal cliff" of nearly $600
billion worth of spending cuts and tax increases set for early
2013 unless they reach a compromise soon to cut the deficit.
There is also the issue of a debt ceiling, which needs to be
raised to avoid a government shutdown.
If Washington does not reach a deal by year-end, investors
fear the U.S. economy could plunge back into recession and
possibly take the global economy along with it.
"The general trend of weaker equities, higher bond prices
and a weaker dollar will likely continue," said Kazuto Uchida,
an executive officer and general manager of the global markets
division at the Bank of Tokyo-Mitsubishi UFJ.
"A key gauge to risk appetite is how far U.S. equities will
decline and whether U.S. 10-year yields will drop to 1.5
percent, as some had predicted," he said.
The dollar was up 0.1 percent to hover near a two-month high
against a basket of major currencies of 80.924 hit on
Wednesday, benefiting from the U.S. currency's safe-haven
The dollar fell 0.2 percent against another safe-haven
currency, the yen, to 79.80. The yen hit a low of 101.72
against the euro, its lowest in about a month.
Spot gold steadied at $1,715.89 an ounce after
soaring to a 2-1/2-week high on Wednesday. Bullion is typically
seen as a safe-haven but also tends to fall with a firmer dollar
which makes dollar-based commodities more expensive for
"Now the global risk has moved to centre on the U.S. and
what it means for that barometer becomes a little messy and hard
to tell," Jeremy Friesen, commodity strategist at Societe
Generale in Hong Kong, said of the dollar as a barometer of
"The dollar should weaken as the Fed offsets any slowdown,
which I expect to be the end result, but in the near term if the
market is nervous, it will bid up the dollar," he said.
The euro remained under pressure at $1.2747, near
Wednesday's two-month low of $1.2736, despite positive news from
debt-laden Greece where the parliament approved an austerity
pacakage needed to unlock vital global aid and avert bankruptcy,
defying political rifts and violent protestors.
Sentiment was dented by a gloomy outlook for Europe after
the European Commission said the euro zone economy would barely
grow next year.
The European Central Bank holds its policy meeting later in
the day, and is expected to keep interest rates unchanged.
Some market watchers were looking for hints of future policy
direction that may affect metals demand from the Chinese
congress, which began on Thursday to usher in a once-in-a-decade
leadership change against a backdrop of growing social unrest
and public anger at corruption and a gap between rich and poor.
"So far, contents of speeches from the 18th Party Congress
have been within expectations. There hasn't been anything
particularly encouraging to investors," said Orient Futures
derivatives director Andy Du.
Oil rebounded after tumbling more than $4 on Wednesday amid
concerns about weak demand for fuel as the U.S. and European
economies face the risk of a prolonged slowdown.
U.S. crude rose 0.6 percent to $84.96 a barrel, after
settling at its lowest level since July at $84.44 while Brent
added 0.7 percent to $107.51.
Sluggish equities sapped sentiment in Asian credit markets,
widening the spread on the iTraxx Asia ex-Japan investment-grade
index by 4 basis points.