Asian share markets mostly lower, Japan on holiday

By Wayne Cole

SYDNEY (Reuters) - The U.S dollar held firm in Asia on Monday as investors looked ahead to higher interest rates from the Federal Reserve, while gold slumped to five-year lows as a lack of global inflation left little to hedge against.

The precious metal ran into a wave of selling in Asia that drove it down almost 4 percent at one stage to as deep as $1,088.05 an ounce. It was last at $1,107.70.

"It looks like someone was taking advantage of the low liquidity environment at the moment. It's a bit of speculative selling going on," said Victor Thianpiriya, analyst at ANZ Bank in Singapore.

Nearly 900,000 lots were traded on a key contract on the Shanghai Gold Exchange, compared to less than 27,000 lots on Friday, Reuters data showed. Prior to Monday, volume for July had averaged less than 30,000 lots.

Activity was light elsewhere with Japan on holiday and a dearth of major data in the diary, leading to a cautious session for stocks in Asia. Financial spreadbetters expected European bourses to open with gains of 0.1 to 0.2 percent.

Australia's main index edged up 0.2 percent, but MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.5 percent.

There was better news from China where home prices rose for a second month in a row in June, suggesting government efforts to boost the struggling property sector have started to gain traction.

China stocks seem to have pulled out of their recent nosedive amid a barrage of measures from regulators and buying by brokerages and mutual funds.

The Shanghai Composite Index was all but flat on the day, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen dipped 0.6 percent.

Greek banks are set to reopen on Monday after a three-week shutdown, while German Chancellor Angela Merkel called for swift aid talks so Athens could also lift withdrawal limits.

With Greece fading from the limelight, markets focused on the relative outperformance of the U.S. economy and nudged the euro near to its lowest in seven weeks at $1.0822.

A break of the May trough around $1.0818/19 would likely embolden bears to head for the April lows at $1.0521.

"For now, with an agreement on the cards and Greece currently adhering to creditors' demands, it appears markets can move on and focus on other things," say analysts at ANZ.

"Solid U.S. data and further easing of global market stresses has driven expectations that the Fed could start to normalise rates this year."

That helped the dollar up to 124.15 yen, near its highest in around three weeks, while the dollar index of 97.998 is on ground last visited in April.

In commodity markets, oil was burdened by the prospect of increased exports from Iran now a deal has been struck to ease sanctions on the country.

Brent crude was off 17 cents on Monday at $56.93 a barrel, while U.S. crude fell 25 cents to $50.64.

(Editing by Shri Navaratnam and Jacqueline Wong)