* Asian markets weighed by losses in U.S., European stocks
* Yen and safe-haven bonds bid on Portuguese bank troubles
* Mood cautious as U.S. earnings season gets underway
By Wayne Cole
SYDNEY, July 11 Asian share markets slipped on
Friday as troubles at a small Portuguese bank managed to
wrongfoot investors already made anxious by the U.S. earnings
season and a spate of disappointing economic data globally.
Tensions in the Middle East also continued to simmer with
Israeli officials seeming to hint at a possible assault on Gaza
by ground forces.
As a result, yields on safe-haven U.S. and German debt fell,
the yen scaled a five-month peak against the euro and gold hit a
three-and-a-half month high.
Japan's Nikkei fell 0.7 percent, while Australia
eased 0.4 percent. MSCI's broadest index of Asia-Pacific
shares outside Japan dipped 0.3 percent.
Analysts emphasised that the woes of one Portuguese bank
were no threat to the sovereign's rating and rather the news
served as an excuse to book profits on what has been a long
rally in European stocks and bonds.
Indeed, there were signs investors 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.
In contrast, European stocks were 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
The damage was all the greater as data showed 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.
Portugal's market fell 4.2 percent and Italy's FTSE
MIB 1.9 percent, pulling down the European index
by 0.78 percent.
While the fate of a relatively minor bank in Europe would
not normally have had much affect 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 0.41 percent, while the Dow
eased 0.42 percent and the Nasdaq 0.52 percent.
The S&P 500 financial sector index fell 0.5 percent
and Wells Fargo & Co, which reports earnings later
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 fell over 4
basis points to 0.4561 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 bund yields ended at a 14-month trough of 1.20
percent. Bonds in the euro zone periphery were not
so lucky, with yields on Portuguese, Spanish and Italian paper
all rising sharply.
The itch for safety benefited the Japanese yen which climbed
a full yen to 137.76 per euro. The dollar dipped to
101.26 yen even as it gained on the euro to $1.3599
Yet the higher-yielding Australian and New Zealand
dollars remained well supported, again suggesting there
was no widespread retreat from risky assets.
In commodities, gold was up at $1,336.01 having
touched a 3-1/2 month top of $1,345.00.
Oil prices fell anew after a brief rally on Thursday. Brent
was off 13 cents at $108.54 a barrel, while U.S. crude
eased 16 cents to $102.77.
(Editing by Eric Meijer)