* Asia share index dips, regional markets mixed
* Signs European equities could steady after selloff
* Yen, safe-haven bonds keep mild bid on Portuguese bank
* Mood cautious as U.S. earnings season gets under way
By Wayne Cole
SYDNEY, July 11 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
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
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
(Editing by Jacqueline Wong & Kim Coghill)