European fears woes weigh on Asian markets

HONG KONG: Caution ahead of government bond sales in Europe this week weighed on Asian shares Tuesday amid concerns another eurozone country might need a bail-out.

And in Australia deadly floods in the northeast put further pressure on the Sydney index after news that eight people were killed and 72 left missing in the latest deluges.

Tokyo slipped 0.23 percent by the break, Shanghai was 0.23 percent lower, Seoul shed 0.34 percent and Singapore was flat. Sydney fell 0.20 percent. But Hong Kong gained 0.33 percent in early trade.

Markets followed their counterparts in Europe and the United States lower as traders fretted about European sovereign debt as Portugal, Spain and Italy prepared for bond issues this week.

Worries resurfaced after reports that Germany and France had pressed Lisbon to accept a bailout, after Ireland and Greece last year had to call for help from the International Monetary Fund and European Union.

Portugal and Spain go into the bond sales with their cost of borrowing hovering at record highs, adding to speculation Lisbon may need help to avoid a debt crisis. The European Commission insisted there was no discussion of a Portuguese bailout and rejected reports saying so, but a diplomat told "there is a lot of pressure on Portugal".

And Okasan Securities strategist Hideyuki Ishiguro said: "Investors are concerned following (Monday's) decline in European shares ahead of the (government) bond auctions in Portugal and Spain" this week.

However, the euro was given a boost in early Tokyo forex trade after Finance Minister Yoshihiko Noda said Japan would buy bonds to be issued by the European Union this month that are aimed at providing support to troubled members. The single currency spiked to $1.2990 immediately after the announcement before easing back to $1.2955 by noon, the same range as in New York late Monday but still higher than the $1.2920 in early Tokyo trade.

The euro traded at 107.54 yen at midday, up from 107.10 in New York while dollar was at 82.99 yen, up from 82.67 yen.

Investors in Sydney pulled out of insurance companies as floods in Queensland continued to wreak havoc, with flash floods smashing through Toowoomba and other mountainside towns.

"You've got to think what implications this (Queensland flood) has on the banks as well as insurers," UBS executive director, Mark Fitzgerald told Dow Jones Newswires.

"A lot of the state is underinsured... There is a lot of uncertainty." Insurer Suncorp-Metway was down 2.4 percent while the banking sector was also lower, with Bank of Queensland down 0.5 percent.

On oil markets New York's main contract, light sweet crude for delivery in February, rose two cents to $89.27 per barrel and Brent North Sea crude for February was down six cents at $95.64.

Gold opened at $1,373.50-$1,374.50 an ounce in Hong Kong, marginally higher than Monday's close of $1,373.00-$1,374.00.