SYDNEY (Reuters) – Asian equities fell on Tuesday, and the euro rallied near 6-1 / 2-month lows as elections in Italy were imminent, but a revival of diplomatic talks with North Korea and a drop in oil prices the last highs supported mood.
MSCI's broadest index for Asia Pacific equities outside Japan .MIAPJ0000PUS lost after three consecutive Meetings 0.5 percent gains.
Japan's Nikkei .N225 slipped more than 1 percent, while South Korean .KS11 shares fell 0.8 percent. Chinese stocks also fell into the red, with the blue chip .SCSI300 losing 0.6 percent.
Australia was the only market in the black, thanks to the gains of bank stocks. [.AX] However, liquidity was relatively low during the holidays in Singapore, Malaysia, Indonesia and Thailand.
"The market has focused on the ongoing political situation in Italy," said Nick Twidale, an analyst with Rakuten Securities Australia in Sydney.
European stocks fought hard overnight after the Anti-Establishment 5 Star and League parties in Italy gave up plans to form a government.
Investors feared that Italy's election campaign could focus on the country's continued membership of the European institutions and strengthen the hand of the populist parties.
In addition to uncertainty, Spanish Prime Minister Mariano Rajoy will see a vote of confidence in his leadership on Friday.
"This should put pressure on risk trading downside," added Twidale. "The (focus) focus will remain on the resurgent US North Korean summit and trade relationship between the US and China as we move through Asian trade."
E-Mini Futures for the S & P500 ESc1 gave early gains, but were still marginally firmer. Trading was dampened overnight with market holidays in the world's two largest financial centers, London and New York.
The upward trend in US equity futures came when South Korean President Moon Jae-in offered more improvised talks and summits with North Korea's Kim Jong Un after the couple's surprise meeting over the weekend. Kim reaffirmed his determination to "complete" the denuclearization of the Korean peninsula, Moon said, while US officials are trying to revive a historic meeting between President Donald Trump and Kim.
The Euro EUR = EBS was last at $ 1.1629 from Monday's $ 1,1168, the lowest since early November.
The dollar rose 0.2 percent against a basket of major currencies to stay near the highest since mid-November. .DXY
But against the safe-haven yen, it dropped to 109 JPY =, approaching a final three-week low of 108.94.
Analysts will next focus on US inflation data due later in the week, which could provide an indication of future interest rate hikes ahead of the next Fed meeting.
In a sign that investors are streaming for safer bets, US 10YT = RR US 10-year Treasuries opened a six-week low of 2.9 percent after Monday's public holiday. Another potential surplus for Asian emerging markets was a [19659-04] lorry strike in Brazil to protest rising fuel prices, which "may lead to higher food prices," JPMorgan said.
Brazilian equities fell more than 4 percent on Monday to their lowest level this year.
Oil prices remained under pressure from expectations that Saudi Arabia and Russia would pump even more crude oil despite rising US oil production. [O/R]
U.S. Crude oil futures CLc1 fell to six weeks lows, looking for a fifth straight day of decline. The July contract was most recently up 1.6 percent at $ 66.81 a barrel.
Brent crude oil futures LCOc1 rose 0.3 percent after falling to $ 74.49 a barrel on Monday, its lowest level in about three weeks. You were last at $ 75.53.
Spot Gold XAU has barely changed at $ 1,297.00 an ounce.
Reporting by Swati Pandey; Arrangement by Eric Meijer and Kim Coghill