Asian markets tumble, Singapore stocks down 1.22% as oil, Greek woes dim mood

Visitors look at a board displaying the opening trade of the first trading day of the year at the Tokyo Stock Exchange on Jan 5, 2015. Asian shares tumbled on Jan 6 as sliding oil prices and political uncertainty in Greece forced investors out of ris
Visitors look at a board displaying the opening trade of the first trading day of the year at the Tokyo Stock Exchange on Jan 5, 2015. Asian shares tumbled on Jan 6 as sliding oil prices and political uncertainty in Greece forced investors out of risk assets and into the safety of government bonds. -- PHOTO: AFP

TOKYO (Reuters) - Asian shares tumbled on Tuesday as sliding oil prices and political uncertainty in Greece forced investors out of risk assets and into the safety of government bonds.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent while Japan's Nikkei dropped 2.0 per cent.

The Straits Times Index was down 40.53 points, or 1.22 per cent, at 3,287.75 at 9:25am.

The unrelenting slide in oil prices showed little signs of slowing in the new year, plunging as much as 6 per cent on Monday to hit their lowest since spring 2009, as increased output of U.S. shale oil has exacerbated a global supply glut.

U.S. crude crashed below US$50 a barrel and last stood at US$50.01 per barrel while benchmark Brent tumbled under US$53 after data showed Russian oil output at post-Soviet era highs and Iraqi oil exports near 35-year peaks.

"Falls in oil prices are going beyond many people's expectations. This will put pressure on the earning of U.S. energy firms," said Hirokazu Kabeya, senior strategist at Daiwa Securities.

The U.S. S&P 500 had its worst day in almost three months on Monday, dropping 1.8 per cent, with energy shares leading the decline.

Adding to the gloom is intensifying talk of a Greek exit from the euro zone amid the ongoing political uncertainty.

Greek parliamentary elections on Jan 25 is widely expected to result in a left-wing government that has vowed to end austerity measures and erase a big portion of its debt.

The political uncertainty could send Greece back into recession, complicating even further its efforts to bring down the country's debt from about 175 percent of economic output.

As the prospect of more policy easing from the European Central Bank grew ever stronger, the euro struggled to find its footing.

Adding pressure on the ECB to do more, German inflation slowed to its lowest in over five years in December. The data came just days after ECB President Mario Draghi said the risks were growing that inflation would stay too low for too long.

The common currency last traded at US$1.1934 after slipping into the US$1.1860 area on Monday, reaching depths not seen since early 2006.

"The next possible targets for the euro will be around US$1.18, the level when the common currency started and around US$1.16, its November 2005 low. It could see further falls depending on the outcome of Greek election, or the euro zone's reaction to that, rather," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

As risk assets came under pressure, prices of safe haven assets such as the yen and government bonds gained on flight-to-quality bids.

The yen strengthened a touch to 119.50 to the dollar from a low of 120.745 hit on Friday.

The 30-year U.S. bond yield fell to a 2-1/2-year low of 2.592 per cent on Monday and last stood at 2.606 per cent .

Gold prices rose more than 1 per cent on Monday and was last at US$1,202.73 per ounce.