Asian shares ease on worries over Spanish banks, Greek chaos

Nikkei opened down 0.4% today after hitting its lowest in nearly three months the previous day

Asian shares fell for a sixth straight session on Thursday, with sentiment taking a further hit from mounting worries about the health of Spanish banks while deepening political chaos in Greece seemed to put it at risk of insolvency and a euro exit.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.1%, touching its lowest in nearly four months. Global shares slid for a sixth day while safe-haven US and German government debt rose on Wednesday.

Japan's Nikkei share average opened down 0.4%, after hitting its lowest in nearly three months the previous day.

Spain took over Bankia, the country's fourth-biggest lender, on Wednesday, aiming to dispel concerns over the government's ability to clean up a financial sector severely hit by a property market crash four years ago.

Financial sources said Spain will demand that banks set aside another 35 billion euros against loans to the ailing construction sector, but uncertainty over the final tally of banking recapitalisation hit the euro and pushed Spanish yields back above 6% on Wednesday.

Greek politicians will continue last-ditch attempts to form a government on Thursday and avoid a new election after voters rejected a bailout deal in Sunday's poll. But prospects looked dim, with seemingly little ground for compromise as parties for and against a bailout were split almost down the middle in the new parliament.

Greece appeared to have averted an imminent funding crisis, however, after the board of the European Financial Stability Facility agreed to a scheduled 5.2 billion euro payment.

"Greek and European issues remain at the forefront," said analysts at Barclays Capital in a note. "However, it appears that political uncertainty is here to stay, and that, combined with weak economic prospects, should keep market concerns elevated. We remain EUR bears," they said, adding that barring a rise in financial sector risks the euro's fall would be gradual.

The euro stood at $1.2930, just above $1.29115 hit on Wednesday, its lowest since January 23. The euro's decline pushed spot gold to four-month lows around $1,580 an ounce on Wednesday. Gold traded down 0.1% at $1,588 on Thursday.

The risk-sensitive Australian dollar was at $1.0050, off Wednesday's low of $1.0021, which was its lowest since December 20. The yen held firm against the dollar, hovering near a 2-1/2-month high of 79.428 yen hit overnight.

Oil fell, with US crude futures down 0.4% at $96.41 a barrel and Brent crude down 0.5% at $112.64 a barrel.

Risk aversion also prevailed in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index expanding by 2 basis points early on Thursday to stand at its widest in more than three months.

Some analysts caution about a further, sharp acceleration in risk aversion.

"Equity vol indices already show that the market is hesitating to stay in a regime of deep stress," said Sebastien Galy, a strategist at Societe Generale.

"VIX hesitates to move to the 20-30 regime of stress. The battle between better economic data and depressed investor sentiment is yet to reach its final conclusion. Greece only provides the headlines, the EFSF will pay its tranche," he said.

The CBOE Volatility index, a key gauge of how investors perceive risk, rose 5.4% to 20.08 on Wednesday.

The VIX index measures expected volatility in the Standard & Poor's 500 index over the next 30 days and its increase reflects mounting risk aversion.