Greece wrangling tempers Asian markets' recovery

Greek resistance to the strict conditions attached to a bailout fund capped the recent strength in Asian shares on Tuesday, as renewed fears of a messy debt default gave pause to mounting hopes the global economy is improving.

The market remained split over whether the wrangling over Greece's debt restructuring talks would eventually be resolved or trigger contagion across other vulnerable euro zone countries.

MSCI's broadest index of Asia-Pacific shares outside Japan was nearly unchanged, after climbing to its highest in more than five months on Monday, before the latest delay to a Greek deal hit stocks around the globe.

Japan's Nikkei average opened down 0.3%, slipping from a three-month high just shy of 9,000 hit on Monday.

Greece's political leaders pushed back their decision for another day, resisting terms of a proposed new bailout deal which demands strict labour reforms and other austerity steps.

"Delay in Greece is weighing on markets," said Yumi Nishimura, senior market analyst at Daiwa Securities.

"Given the latest headlines, I'm a bit worried that there will be no agreement tonight. That may prompt market players to lock in profits, rather than betting on further gains," she said.

The full package must be approved by the euro zone, the European Central Bank and the International Monetary Fund before February 15 in order to complete legal procedures for a bond swap deal for a March 20 bond redemption.

Moreover, some euro zone countries require parliamentary approval to raise the bailout money.

The euro eased 0.1% to $1.3118, having recovered from an overnight low of $1.3026.

The dollar steadied against the yen at 76.60. Data from Japan's Finance Ministry on Tuesday confirmed that Tokyo conducted stealth foreign exchange intervention in October-December, even after a massive intervention on October 31 when the yen hit a record high around 75.31.

The Australian dollar stood at $1.0715, near a six-month high set last week, ahead of the Reserve Bank of Australia's rate decision due at 0330 GMT. Market players expect a 25 basis point cut due to global growth concerns and a benign inflation environment.

Many commodities that trade in dollars, such as gold and copper, fell on Monday as the dollar's rise on the back of the euro's drop made it costlier for non-dollar holders to buy.

Spot gold was barely changed at $1,720 an ounce.

US crude futures inched up above $97 a barrel after falling nearly $1 on Monday. Brent rose $1.35 to settle at $115.93 a barrel on Monday, its highest close since August 2, as cold weather in Europe boosted heating fuel demand and pushed its premium to US oil to the highest since November.

Interbank lending rates in Europe continued to improve despite the Greece issue, largely due to the ECB's generous funding in December and expectations ahead of another such liquidity operation scheduled for later this month.

Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell on Monday to 1.094% from 1.102%, hitting the lowest level since late February last year.

Asian credit markets were subdued, with the spreads on the iTraxx Asia ex-Japan investment grade index little changed, after tightening sharply on Monday.