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Singapore. — Concern about a Greek bail-out, early Italian elections and comments by the European Central Bank (ECB) chief about the need for continued stimulus all kept the euro under pressure yesterday. European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens, including the yen and gold, although trading was thin with several markets closed for holidays.
The euro slid 0,3 percent to $1,1129 in its fourth session of declines. James Woods, global investment analyst at Rivkin Securities in Sydney, attributed most of the currency’s decline on Tuesday to a German press report saying Athens may opt out of its next bail-out payment if creditors cannot strike a debt relief deal.
“The bail-out payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bail-out payment the probability of a default would spike, reopening the discussion around a Grexit from the eurozone,” Woods said.
However, he cautioned against reading “too much into it” without more details or confirmation, adding it was unlikely Greece would forego the bail-out payment at this stage.
Eurozone finance ministers failed to agree with the International Monetary Fund (IMF) on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting.
Comments by former Italian prime minister Matteo Renzi on Sunday in favour of holding an election at the same time as Germany’s in September also pulled the euro lower.
So did a statement by ECB president Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0,25 percent with US and British markets closed on Monday.
China and Hong Kong markets were closed for holidays yesterday.
Japan’s Nikkei dropped 0,3 percent, dragged down by a stronger yen.
South Korea’s Kospi fell 0,5 percent as investors took profits following the market’s record-breaking rally in May.
European blue-chip stocks fell 0,2 percent on Monday, with Italy’s banking index sliding 3,4 percent, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.
Sterling retreated 0,15 percent to $1,2818 after British Prime Minister Theresa May’s lead over the opposition Labour Party dropped to six percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans.
The dollar declined 0,4 percent to ¥110,815. Japanese labour demand rose to its strongest level in 40 years in April, and retail sales for the month beat the expectation to rise 3,2 percent from a year earlier.
The dollar index, which tracks the greenback against a basket of trade-weighted peers, however, advanced 0,2 percent to 97,659.
Markets are also awaiting economic indicators including French first-quarter GDP, German inflation data for May, and US inflation for April later in the session.
In commodities, oil prices retreated, as concern lingered about whether the extension of output cuts by Opec and other producing countries will be enough to support prices.
US crude futures slipped about 0,1 percent to $49,77 a barrel. Global benchmark Brent fell 0,4 percent to $52,09.
Gold advanced 0,1 percent to $1 268,34 per ounce. – Reuters.
Online Reporter