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Asian shares got off to a lacklustre start on Tuesday, as a sharp sell-off in commodities and political uncertainty in Greece made investors less willing to take risks in the final trading days of 2014.
Activity was thin ahead of the New Year holiday, with many traders having closed out positions. Japanese markets will be shut from Wednesday to Friday, reopening next Monday.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged down about 0.2 per cent, while Japan’s Nikkei stock average fell 0.7 per cent.
On Wall Street overnight, the Dow Jones industrial average ended slightly down, while the S&P 500 and the Nasdaq Composite managed to eke out modest gains.
National election in Greece
Greek Prime Minister Antonis Samaras had failed to get enough support for his presidential nominee on Monday, and will call a national election for January 25.
The news caused Greek shares to plunge as much as 11.3 per cent before closing down 3.9 per cent, and yields on 10-year Greek bonds touched their highest since September 2013.
The election could open the way for Greece’s Syriza party to come to power. That party says it wants to wipe out a big part of the country’s debt and cancel the terms of the bailout Athens received from the European Union and the International Monetary Fund.
Euro plunges
Developments in Greece weighed on the euro overnight, which dropped as low as $1.2143 on the EBS trading platform, its lowest since August 2012. It was last steady on the day at $1.2154.
“Our bearish view on EUR/USD rests on the assumption that monetary policy settings on both sides of the Atlantic are likely to diverge markedly next year,’’ strategists at UBS wrote in a note to clients.
“That remains the case, but now we believe the return of political uncertainty to Greece could trigger an acceleration of the euro’s downtrend over the next two months,’’ UBS said.
US economy
Solid recent US data has reinforced the view that the US economy is improving enough for the Federal Reserve to consider ending its near-zero interest-rate policy in mid-2015. That would be in contrast to the still-sluggish economies of the euro zone and Japan, where central bankers are likely to continue monetary easing.
Dollar vs yen
Against its Japanese counterpart, the dollar was steady on the day at 120.65 yen, not far from a 7-1/2 year high of 121.84 hit earlier this month.
The dollar's general strength continued to pressure commodities, which are priced in dollars and therefore become more expensive and less appealing to holders of weaker currencies.
Copper fell to its lowest level in four and a half years on concerns about a strong dollar and a slowdown in China. US oil rose up about 0.2 per cent to $53.70 a barrel after shedding 1.9 per cent in Monday.
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