Asian markets edge down on Europe fears

On the first full day of trade after Christmas eyes were on Italy, which held a debt auction amid weakened confidence after lenders in Europe deposited a record amount with the central bank rather than lend to each other.

Tokyo fell 0.20 per cent, or 16.94 points, to 8,423.62, Sydney fell 1.25 per cent, or 51.6 points, to 4,088.8 and Seoul shed 0.92 per cent, giving up 16.90 points to 1,825.12.

Hong Kong slipped 0.59 per cent, or 110.50 points, to 18,518.67, although Shanghai staged an afternoon rally to end up 0.18 per cent, or 3.81 points, at 2,170.01.

Dealers were given a positive cue from the United States, where another batch of upbeat data indicated a brighter outlook for the world's biggest economy.

The Conference Board reported a strong surge in consumer confidence this month, with its monthly index surging back to its levels of early 2011 after the collective mood soured deeply in the middle of the year.

"This is traditionally a good time of the year for equities, but we have 20 billion euros of Italian government debt being auctioned in the next two days, so there is some event risk which will probably cap any gains," IG Markets institutional dealer Chris Weston said.

After most Asian markets closed, Italy said it paid sharply lower rates to raise 9.0 billion euros ($11.8 billion) in a six-month bond sale, easing worries about Europe's third-largest economy financing its huge debt.

The rate was 3.251 per cent, half the 6.504 per cent paid for a similar sale last month and well below a crucial seven per cent level seen as unsustainable for governments to service their debts.

Investors were also concerned a credit crunch in Europe was possible after the region's banks deposited a record amount of overnight funds at the European Central Bank Monday.

Lenders put 411.8 billion euros ($535 billion) on deposit for 24 hours at the ECB, beating the previous record of 384.3 billion euros seen in June 2010, showing that banks continue to be reluctant to lend to each other on the interbank market.

Last week, more than 500 banks borrowed a record 489.2 billion euros from the ECB in a new three-year lending facility.

London's benchmark FTSE 100 index rose 0.16 per cent to 5,521.66 points early Wednesday, with Frankfurt's DAX 30 easing 0.23 per cent to 5,875.87 points and in Paris the CAC 40 slipped 0.03 per cent to 3,102.24 points.

On currency markets, the dollar stood at 77.71 yen, from 77.88 in New York late Tuesday.

The euro was at $1.3072 and 101.58 yen, compared with $1.3070 and 101.77 yen in New York.

Oil was mixed after surging Tuesday on Iran's warning that it could shut down the strategic Strait of Hormuz if the West applies sanctions on Iran's oil exports.

New York's main contract, light sweet crude for February delivery, gained 50 cents to $101.92 per barrel, while Brent North Sea crude for February delivery shed 65 cents $108.44.

Gold stood at $1,588.26 an ounce at 1100 GMT, compared with $1,597.27 late Tuesday.

In other markets:

-- Taipei fell 0.40 per cent, or 28.36 points, to 7,056.67.

Leading IC design house MediaTek fell 1.25 per cent to Tw$275.5 while Taiwan Semiconductor Manufacturing Co was 0.26 per cent higher at Tw$75.7.

-- Manila closed down 0.57 per cent, or 24.80 points, at 4,336.63.

Banco de Oro shed 0.2 per cent to 58.50 pesos, power producer First Gen was down 2.6 per cent at 14.30 pesos and Philippine Long Distance Telephone shed 0.5 per cent to 2,518 pesos.

-- Mumbai shares closed 1.09 per cent lower, or 173.02 points, at 15,700.93.

Utility Tata Power added 1.92 per cent to 90.25 rupees.

-- Bangkok slipped 0.02 per cent, or 0.19 points, to 1,028.19.

Banpu lost 0.74 per cent to 540 baht, while PTT dropped 0.31 per cent to 317 baht.

-- Indonesian shares declined 0.5 per cent, or 20.21 points, to 3,769.21.

Car maker Astra International declined 1.0 per cent to Rp 73,250, while Bank Mandiri fell 2.2 per cent to Rp 6,600 and Telekomunikasi Indonesia slipped 2.1 per cent to Rp 7,050.

-- Kuala Lumpur shares edged 0.21 per cent higher, or 3.20 points, at 1,504.11.

Petronas Gas rose 4.86 per cent to close at 15.10 ringgit and carmaker Proton Holdings added 1.88 per cent to end at 4.88 ringgit.

-- Wellington rose 0.67 per cent, or 21.40 points, to 3,236.90.

Air New Zealand gained 3.37 per cent to NZ$0.92, Contact Energy was unchanged at NZ$5.10 and Telecom jumped 2.50 per cent to NZ$2.05.