Asia shares ruffled by risk aversion; euro retreats

By Wayne Cole

SYDNEY (Reuters) - Asian markets were on the defensive on Friday after a sudden reversal in some very popular, and thus crowded, trades sparked a bout of global risk aversion.

The net result was a pullback in the euro, sterling, and stocks and a bounce for the yen, gold and bonds. Oil prices also fell sharply, though for purely idiosyncratic reasons.

The various moves seemed to pay no regard to the news flow, which was generally upbeat with global manufacturing ending 2013 on a strong note as the United States, Japan and Germany all saw demand pick up, although there was some moderation in China.

There is little in the way of fresh data due on Friday, though a speech by Federal Reserve Chairman Ben Bernanke will bear watching given the markets' sensitivity to anything to do with tapering.

On Wall Street, the Dow fell 0.82 percent on Thursday and the S&P 500 lost 0.89 percent. MSCI's 45-country share index slipped 1 percent, while U.S. dollar-denominated Nikkei futures fell 2.1 percent.

Early Friday, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, with the Australian market off 0.5 percent.

Anxious eyes were fixed on Thailand after the stock market sank over 5 percent on Thursday amid deepening political uncertainty. The Thai currency also took a bath, hitting its lowest since early 2010 at 32.95 per dollar.

Shares in South Korea also made a shaky start to the year, though there the problem was one of a strong won and a weak yen undermining the competitiveness of the country's huge export companies.

Samsung Electronics Co Ltd alone fell more than 5 percent on Thursday to its lowest in over four months.

EURO SETBACK

In currencies, the euro took a spill as speculators booked profits on long positions after a strong 2013. The single currency had dropped back a full cent to $1.3664 and briefly touched a two-week low of $1.3628.

The same forces gripped sterling, another strong performer in recent months. The pound peeled away to $1.6451 from a 28-month peak of $1.6605.

That in turn lifted the U.S. dollar index, a gauge of the greenback's value against six major currencies, by the most in five months. Early Friday, the index was up at 80.580 from a low of 80.083 the day before.

Going the other way, the yen enjoyed a short-covering bounce. Borrowing in yen to buy higher yielding assets has been a vastly popular trade, leaving the market vulnerable to sudden, if usually brief, reversals.

In this case the dollar came off to 104.79 yen after being as high as 105.44, its strongest level since October 2008. Likewise, the euro retreated to 143.26 yen from a peak of 145.12 on Thursday.

The short-covering theme extended to U.S. Treasury debt, which has been under pressure for pretty much all of the past two months. Yields on the 10-year note dipped to 2.99 percent from a top of 3.04 percent, which had been the highest sine mid-2011.

Gold was another beaten-down asset to get a reprieve. The metal swung up to $1,224.00 having been as low as $1,183.80 early in the week.

Three-month copper touched its highest level in seven months encouraged by the improving background for global manufacturing.

Oil prices went the other way as Libya prepared to restart a major oilfield and on speculation of a sharp rise in crude stockpiles in the United States.

Brent crude lost $2.98 on Thursday to $107.82 a barrel. U.S. crude was at $95.45 having shed almost $5 on Thursday.

(Editing by John Mair)