GLOBAL MARKETS-Asian stocks trim losses, Italian auction looms

SINGAPORE (Dec 29):'' Asian stocks slipped on Thursday on weakness in
the U.S. and European share markets and caution ahead of an Italian debt
sale, though year-end window dressing of portfolios by some traders
helped trim losses.

European shares are expected to inch higher,
reversing some of the previous session's losses, with cautiousness
ahead of the key Italian debt auction by Italy seen limiting the gains.

Spreadbetters expect London's FTSE to open up 0.04 percent, Frankfurt's
DAX to open up 0.3 percent, and Paris' CAC 40 to open up 0.3 percent.

The euro extended losses against the dollar to near a one-year low, and
a 10-year low against the yen, while the sell-off in stocks and a firm
U.S. currency helped crude oil snap a six-session rally and kept gold
prices near a three-month low.

The Nikkei ended 0.3 percent
lower, recouping some of its 1.1 percent intraday loss. The MSCI
ex-Japan Asia Pacific index also shed 0.3 percent, weighed down by
consumer and material stocks. Both indexes look set to be down about 18
percent during 2011.

Traders said Italy's sale of up to 8.5
billion euros ($11 billion) of debt later on Thursday will provide
further cues for risky assets.

The auction is seen as the first
test of banks' willingness to buy longer-term sovereign debt with the
nearly 500 billion euros they borrowed last week from the European
Central Bank.

While Italy's short-term funding costs halved at
an auction on Wednesday, market players are worried that thin volumes
prevalent across markets near the end of the year could complicate its
efforts to sell longer-dated bonds.

"If it goes well, it's an
indication that, one, yield is coming down, so the cost of funding is
falling for the Italian government," said Martin Lakos, division
director at Macquarie Private Wealth.

"And, two, if there's demand for the paper, that's a sign of confidence, which is what the market's in real need of."

EURO, OIL, GOLD SLIP

The euro weakened in Asia, pressured by stop-loss selling from Japanese
retail investors as well as some offloading by exporters, with moves
amplified in poor year-end liquidity and traders said the currency is
likely to stay vulnerable.

The single currency hit $1.2887,
moving closer to its 2011 trough of $1.2860 on Jan. 10. Against the yen,
the euro skidded to a 10-year trough around 100.70, before steadying at
100.88.

At 0615 GMT, the euro traded at 1.2926 versus the dollar and 100.47 versus the yen.

"Nobody sees anything on the horizon that could be mildly positive for
the euro," said Rob Ryan, FX strategist for BNP Paribas in Singapore.

The one factor that may lend the euro some support is market
positioning, which is already tilted heavily toward being short the
euro, Ryan said, adding that another is the potential for fund
repatriation by European players.

Crude oil, which had gained
for six sessions on heightened supply worries after Iran threatened to
block the Strait of Hormuz, eased as traders viewed the threat as
rhetoric.

"A big increase in U.S. crude oil stocks and the
falling euro against the dollar are the main pressure points for the
market at the moment," said Ken Hasegawa, a derivatives manager with
brokerage Newedge in Tokyo.

"We also had six consecutive days
gaining in the oil market, so it is not strange to see some
profit-taking from these sharp gains."

Brent eased three cents to $107.53 a barrel by 0207 GMT, adding to a loss of nearly $2 the day before.

Gold wallowed near a three-month low on Thursday, remaining under
pressure due to a firm dollar, while investors fretted over the Italian
bond auction.

Spot gold edged down 0.3 percent to $1,550.90 an
ounce by 0022 GMT, on course for an 11-percent decline in December. It
hit a three-month low of $1,549.24 in the previous session. - Reuters