Asian shares tumbled on Tuesday as sliding oil prices and political uncertainty in Greece forced investors out of risk assets and into the safety of government bonds.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.0 per cent, retreating almost half-way from its recovery from a 10-month low hit last month.

Japan’s Nikkei dropped 2.4 per cent. All markets in the region were under water with even high-flying mainland Chinese shares, which hit 5-1/2-year highs earlier in the session, pulling back.

The unrelenting slide in oil prices showed little signs of slowing in the new year, plunging as much as 6 per cent on Monday to hit their lowest since spring 2009, as increased output of US shale oil has exacerbated a global supply glut.

“Fall in oil prices is going beyond many people’s expectations. This will put pressure on the earnings of US energy firms,’’ said Hirokazu Kabeya, senior strategist at Daiwa Securities.

US crude crashed below $50 a barrel on Monday, while benchmark Brent tumbled under $53 after data showed Russian oil output at post-Soviet era highs and Iraqi oil exports near 35-year peaks.

US crude last traded at $50.23, while Brent stood at $53.38.

Although crude futures rebounded in Asia, concerns that current low prices would squeeze many energy producers hurt any assets with close links to energy.

The US S&P 500 had its worst day in almost three months on Monday, dropping 1.8 per cent, with energy shares leading the decline.

Adding to the gloom was increasing speculation that Greece might be kicked out of the euro zone if a left-wing party that has vowed to end austerity measures and erase a big portion of its debt wins in January 25 elections as widely expected.

Still, recent developments in Greece have not so far hit other periphery euro zone bonds, with their yields stuck near record low levels, as investors see limited risk of a collapse of the monetary union.

Part of the reason behind market stability is expectation that the European Central Bank could start buying government debt this year to shore up the economy.

Adding pressure on the ECB to do more, German inflation slowed to its lowest in over five years in December. The data came just days after ECB President Mario Draghi said the risks were growing that inflation would stay too low for too long.

As the prospect of more policy easing from the ECB grew ever stronger, the euro struggled to find its footing.

The common currency last traded at $1.1950 after slipping into the $1.1860 area on Monday, reaching depths not seen since early 2006.

“The next possible targets for the euro will be around $1.18, the level when the common currency started and around $1.16, its November 2005 low. It could see further falls depending on the outcome of Greek election, or the euro zone’s reaction to that, rather,’’ said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

As risk assets came under pressure, prices of safe haven assets such as the yen and government bonds gained on flight-to-quality bids.

The yen strengthened 0.3 per cent to 119.25 to the dollar from a low of 120.745 hit on Friday.

The 30-year US bond yield fell to a 2-1/2-year low of 2.592 per cent on Monday and last stood at 2.601 per cent.

Gold prices rose more than 1 per cent on Monday and were last at $1,204.27 per ounce.

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