Euro down, stocks weak as Europe meeting reaches no deal

HONG KONG, May 18, 2010 (AFP) - The euro was back under pressure on Tuesday and Asian markets were lacklustre as a eurozone debt crisis meeting failed to reach a deal on a trillion-dollar rescue fund.

Eyes were on Brussels where finance ministers of the 16 euro member states are trying to agree funding arrangements for the bailout for struggling economies, which many fear may not be enough to prevent a financial meltdown.

However, despite seven-hour negotiations on Monday they had still not finalised an agreement and said they would reconvene on Friday.

The news weighed on the euro, pushing it down to 1.2356 dollars in Tokyo morning trade from 1.2394 dollars in New York late Monday where it had slightly rebounded from its low of 1.2234 seen earlier in the day.

"The market simply doesn't want to buy the euro. Confidence on the euro will not be restored" until the fiscal crisis in Greece and other countries is resolved, said Credit Suisse strategist Satoru Ogasawara.

Hong Kong rose 0.36 percent by the break.

Tokyo was flat, edging up 6.88 points to 10,242.64 after it hit an 11-week low Monday, helped by a slight pick-up in the euro against the yen, which helped exporters.

The European unit sank to 114.17 yen from 114.79 yen in New York but was higher than the 112.80 it was at on Monday.

Dealers are concerned that a default in Greece, which is mired in severe fiscal problems, would hit the financial system in the same way the collapse of Lehman Brothers did in 2008.

They are also worried that austerity measures brought in by several under-pressure countries to rein in their debt will crush European growth.

"The support package cobbled together by EU governments and the IMF may have averted a near-term sovereign debt crisis," said Capital Economics in a research note.

"But it is conditional on massive fiscal consolidation (and structural reform) that may ultimately prove too much for the electorates of some member states in the eurozone to bear.

Shanghai fell 0.70 percent, extending losses on the euro crisis as well as persistent worries over further tightening measures in the mainland real estate sector, dealers said.

The key index lingered at more than a one-year low after plunging 5.07 percent in the previous session. The market has lost nearly 30 percent since the beginning of 2010.

"Investors don't dare to hunt for bargains," Zhang Qi, an analyst at Haitong Securities, told Dow Jones Newswires.

"The government didn't stand up to say something comforting after the Shanghai market fell to a more than one-year low yesterday."

Singapore was flat.

Gold opened at 1,225.00-1,226.00 US dollars an ounce in Hong Kong, down from Monday's close of 1,234.00-1,235.00 dollars as dealers sell the precious metal after it hit record highs last week.

Oil was higher. New York's main contract, light sweet crude for delivery in June, added 58 cents to 70.66 dollars a barrel. The contract briefly plumbed to 69.27 in the US Monday, its lowest level since October 5, 2009.

London's Brent North Sea crude for July was up 78 cents at 75.88 dollars.

In other markets:

-- Seoul closed 0.50 percent, or 8.27 points, lower at 1,643.24.

-- Manila closed 0.74 percent, or 24.24 points, lower at 3,265.07.

Metropolitan Bank and Trust fell 0.87 percent to 57 pesos, but First Philippine Holdings bucked the trend, adding 0.90 percent to 56 pesos.

-- Taipei fell 0.18 percent, or 13.42 points, to 7,585.30.

United Microelectronics Corp was 1.35 percent lower to 14.7 Taiwan dollars while Hon Hai was flat at 141.0.

-- In Sydney, the benchmark S&P/ASX 200 ended up 0.08 percent at 4,470.7 after spending most of the day in negative territory.

-- New Zealand shares closed 0.60 percent lower Tuesday as weak global sentiment continued to weigh on investors.

The benchmark NZX-50 index fell 19.07 points to 3,151.68.

"Global concerns are weighing on the market still," said Craigs Investment Partners senior dealer Bryon Burke.

Infrastructure investor Infratil fell a cent to 1.67 dollars despite turning around its results in the year to March to post a 29 million dollar (20 million US) net profit following the previous year's 191 million dollar loss.

Wellington fell 0.60 percent, or 19.07 points, to 3,151.68.

Telecom ended unchanged at 2.07 New Zealand dollars, discount retailer The Warehouse fell 2.2 percent to 3.49 and Kiwi Income Property fell 1.0 percent to 96 cents.

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