Asian markets mixed amid new Europe fears

HONG KONG – Renewed fears over Europe’s sovereign debt crisis continued to dampen sentiment in Asia Tuesday as investors also weighed a mixed bag of data out of the United States.

Tokyo rose 0.18 percent by the break and Sydney was 0.10 percent higher but Hong Kong shed 0.32 percent, Shanghai lost 0.47 percent and Seoul was 0.14 percent lower.

Fears that Spain could follow Greece, Ireland and Portugal in needing a bailout sent the cost of the country’s debt above six percent for the first time since late last year.

Investors fear that Madrid could slip into a spiral of recession owing to the swingeing cuts it has made to reduce its public deficit.

The yield on Spanish 10-year debt bonds climbed to 6.094 percent on Monday from 5.960 percent at the close of trading on Friday.

The country’s borrowing costs are higher than at any time since the European Central Bank introduced its first operation to provide cheap loans to troubled regional banks in December.

“Market focus looks set to remain in Europe. Spanish debt auctions tonight and on Thursday will be closely watched,” Mike Jones, currency strategist at Bank of New Zealand said in a note.

“Any evidence of waning demand for Spanish debt would see a heavy toll taken on the euro,” he said, according to Dow Jones Newswires.

Eurozone heads were given a boost on Tuesday morning when Japan pledged to contribute $60 billion to the International Monetary Fund as part of the US-based organisation’s bid to boost a firewall against the debt crisis.

The decision comes days before a Group of 20 finance chiefs’ meeting in Washington that will likely focus on the issue and follows a eurozone move to temporarily hike its bailout fund to 700 billion euros from 500 billion.

In early Asian trade the euro bought $1.3118, compared with $1.3143 late Monday in New York, while it was at 105.53 yen from 105.64 yen.

However the single currency is still up from the lows of $1.2995 in Europe and 104.85 yen in Asia Monday.

The dollar was trading at 80.43 yen in early Asian trade, compared with 80.39 yen late Monday in New York.

Data from the United States were inconclusive as to whether the world’s biggest economy was improving.

The Commerce Department reported overall retail and food service sales expanded by 0.8 percent last month, slightly below February’s increase but better than analysts expected.

But the New York state manufacturing index plunged to 6.6 in April, from 20.2 in March, and a homebuilders’ sentiment index fell more than expected.

Financials were lifted, however, after Citigroup reported a better-than-forecast $2.9 billion profit for the first quarter of the year.

On oil markets, New York’s main contract, West Texas Intermediate crude for delivery in May, was up 19 cents to $103.12 per barrel while Brent North Sea crude for June shed 27 cents to $118.41.

Gold was at $1,649.40 an ounce at 0315 GMT, compared with $1,650.11 late Tuesday.