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 The Greek government brought forward a presidential vote to next
week in a gamble that could trigger parliamentary polls if Prime
Minister Antonis Samaras fails to have his candidate elected. Greek
government bond yields soared 47 basis points to 7.81
percent.
Chinese shares notched up their biggest daily percentage loss in
more than five years and the yuan currency took its biggest hit
against the dollar since 2008.
But the main action was in oil. Brent crude <LCOc1> fell as far as
$65.29 a barrel in Asian trade, its lowest since September 2009,
before rebounding.
Brent, which has fallen some 43 percent in the last six months on
concern over a swelling supply glut, was last trading at $66.77 per
barrel.
European shares fell, following losses in Asia. Wall Street also
looked set to open some 0.3 percent lower, according to stock index
futures <ESc1>.
The pan-European Eurofirst 300 was down 1 percent, hit by
energy shares and after British grocer Tesco cut full-year
profit expectations by almost a third.
"Weak oil and commodity prices in general are probably signalling
that the recovery of the world economy is weak," said Philippe
Gijsels, head of research at BNP Paribas Fortis Global Markets in
Brussels.
Tokyo's Nikkei stock index closed down 0.7 percent, pulling away
from 7-1/2-year highs as the stronger yen prompted investors to take
profits on exporters.
Shanghai shares dropped more than 5 percent for their biggest
one-day percentage fall since August 2009, snapping a two-week rally
fuelled in part by speculation the central bank would ease policy
further.
The yuan slid nearly half a percent against the dollar and last
traded at 6.1855 to the U.S. currency.
DOLLAR PULLBACK
The dollar fell 0.6 percent to 119.96 yen, pulling away from
Monday's seven-year high of 121.86.
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"People are cutting the higher-yielding currencies which they've
been funding through being short yen and that position is being
reversed somewhat, which is manifesting itself in a much lower
dollar/yen," said Neil Jones, head of FX hedge fund sales at Mizuho
bank in London.
The dollar had earlier gained on a Wall Street Journal report that
Federal Reserve officials were considering dropping an assurance
that short-term interest rates would remain near zero for "a
considerable time" at its Dec. 16-17 policy meeting.
However, San Francisco Fed President John Williams told Market News
International on Monday that "'considerable time' captures about as
best you can with two words...the appropriate time for liftoff".
The euro strengthened 0.3 percent to $1.2353 and the greenback
dropped 0.2 percent against a currency basket.
German 10-year government bond yields, the euro zone benchmark, were
all but flat at 0.72 percent
The weaker dollar pushed gold above $1,200 an ounce. It was last up
0.3 percent at $1,204.60.
(Additional reporting by Wayne Cole in Sydney, Adam Rose in Beijing,
Jemima Kelly and Jamie McGeever in London; Editing by Mark
Potter/Ruth Pitchford)
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