GLOBAL MARKETS-Shares ease, Spanish debt costs curb risk appetite

TOKYO(Reuters): Asian shares and the euro eased on Tuesday, with a
relief rally from last week's heavy selling faltering quickly as a
surge in Spanish borrowing costs added to simmering worries about
Europe's debt restructuring challenges.
MSCI's broadest index of
Asia-Pacific shares outside Japan inched down 0.1 percent, hovering
near its lowest level since late December touched on Friday.
Japan's Nikkei average opened down 0.3 percent.
Spain's
plan to use public debt to revive one of its troubled banks raised
concerns it could use public money to recapitalise other fragile
lenders, further lifting the country's debts and making its refinancing
efforts even more difficult amid surging borrowing costs.
Spanish
10-year bond yields jumped to 6.53 percent on Monday - their highest
since November 2011 - pushing the yield premium over safe-haven German
Bunds to 515 basis points, its widest in the 13-year history of the
euro.
A 10-year sovereign debt yield exceeding 7 percent is
widely perceived as unsustainable for an economy, and could force the
country to seek an international bailout, as was the case for Greece,
Ireland and Porugal.
The climb in Spanish yields underscored the lack of confidence in Madrid's ability to stabilise its finances and banking sector.
As
markets turned to Spain while awaiting Greece's crucial June 17
elections, Athens handed 18 billion euros ($22.57 billion) to its four
biggest banks on Monday, via bonds from the European Financial
Stability Facility rescue fund, allowing the stricken banks to regain
access to ECB funding.
"Everything is lined up for a corrective
week for risk assets," said currency strategist Kit Juckes at Societe
Generale in a note to clients.
"The release of the U.S. labor
report on Friday could potentially be pivotal for risk appetite. Many
investors and traders will want to have light(er) positions in the
run-up."
The euro failed to follow through on its short covering rally on Monday, staying under strong selling pressures.
"And
that could bring the wider risk bounce to a pretty sharp end. It's all
a story of a squeeze that never really squeezed shorts out," Juckes
said.
The single currency fell 0.2 percent to $1.2519, inching
closer to the $1.2495 hit on Friday, its lowest since July 2010.
Traders said a break below $1.25 could accelerate its spiral downward.
As
investors sought the safety of U.S. dollars, the dollar index, which
tracks its performance against a basket of major currencies, was down
0.1 percent at 82.347 but still near Friday's high of 82.461, its
strongest since September 2010.
Asian credit markets were
subdued early on Tuesday, with the spread on the iTraxx Asia ex-Japan
investment-grade index barely changed from Monday.
U.S. crude was up 0.2 percent at $91 a barrel on Tuesday.
Resurfacing
Middle East oil supply worries on minimal progress in talks over Iran's
nuclear programme supported Brent crude futures, lifting them up to a
high of $108.04 a barrel on Monday. Brent was down 0.1 percent at
$107.06 on Tuesday.