* MSCI Asia ex-Japan down 0.8 pct, Nikkei opens down sharply
* Euro hits 23-month lows vs dollar, 4-1/2 month low vs yen
* Oil extends losses
By Chikako Mogi
TOKYO, May 31 (Reuters) – Asian shares, the euro and oil
prices fell on Thursday as surging borrowing costs in troubled
Spain heightened fears that more countries in the euro zone will
be hit hard by the region’s debt crisis.
Japan’s Nikkei average slid 2 percent while
MSCI’s broadest index of Asia-Pacific shares outside Japan
looked set to revisit its 2012 low with a
decline of 0.8 percent.
The euro fell in early Thursday trade to a 23-month low of
$1.2361 and a 4-1/2 month low against the safe-haven yen
below 97.70.
“There is no exit in sight currently for the euro to get out
of this downtrend because there is no shortage of negative
news,” said Hisamitsu Hara, chief FX manager at Bank of
Tokyo-Mitsubishi UFJ.
“Problems in Spain, a large euro zone economy, heighten
fears while the risk of Greece leaving the euro bloc raises
contagion concerns. The euro remains depressed, with players
cautiously testing the downside”.
Hara added that the euro could weaken until support at
the$1.19 level. The euro dipped below $1.19 in June 2010.
A caution by Spain’s central banker that Madrid will miss
deficit targets this year pushed Spanish 10-year yields
above 6.7 percent, close to 7 percent, a level
seen as unsustainable and which could push Spain to seek a
bailout.
The cost of insuring against a Spanish default scaled a
record high near 600 basis points while Italy, which is also
struggling with huge public debt, saw its 10-year yields
top 6 percent for the first time since January.
Yields on all German bond maturities hit record lows on
Wednesday, pushing the premium investors demand to hold Spanish
debt over German debt to its highest since the launch of the
euro at around 543 basis points.
Those developments led to declines of more than 1 percent
for both U.S. and European stocks. Spain’s stock market hit a
nine-year low.
As risk aversion gripped financial markets broadly, strong
bids for safe-haven assets sent 10-year U.S. Treasury yields
down to their lowest in at least 60 years at 1.620
percent on Wednesday. The yield on five-year Japanese government
bonds fell to 0.20 percent, its lowest since October 2010.
The dollar index, measured against a basket of major
currencies, extended its rally to reach its highest level since
September 2010 above 83.1 on Thursday. The yen rose to a 3-1/2
month high against the dollar at 78.86.
Some analysts said the dollar index could be in for a
sustained period of dollar strength for the next couple of
years.
The strong dollar and intensifying risk aversion sent the
Thomson Reuters-Jefferies CRB index, a global benchmark
for commodities, tumbling 1.7 percent on Wednesday to its lowest
levels since September 2010.
Oil prices fell to multi-month lows on Wednesday and looked
set to post their biggest monthly declines since October 2008, a
month after the collapse of Lehman Brothers.
U.S. crude futures were down 0.3 percent at $87.60 a
barrel on Thursday, after slumping $2.94 to settle at $87.82,
the lowest settlement since Oct. 21, 2011.
Brent crude fell 0.3 percent to $103.19 a barrel on
Thursday after falling more than $3 to settle at $103.47 a
barrel, the lowest settlement since Dec. 16.
The European Commission threw Spain two potential lifelines,
offering more time to reduce its budget deficit and offering
direct aid from a euro-zone rescue fund to recapitalise
distressed banks.
But any relief from the news was quickly offset by the
latest Greece polls showing parties for and against a bailout
neck-and-neck or very close to each another ahead of a June 17
election that may decide whether Greece remains in the euro.
Asian credit markets were weaker, with the spread on the
iTraxx Asia ex-Japan investment-grade index
widening by 5 basis points early on Thursday.
