With U.S. markets closed on Monday, Asian shares declined on Tuesday as a result of a breakdown in talks between Greece and its creditors. As a result, analysts are expecting volatility in the markets ahead of the Chinese New Year holidays which will start this week. On Monday, during talks between the eurozone finance ministers and Greece, Athens rejected a proposal to request an extension for 6 months of its international bailout. This prompted fresh concerns regarding the future of Greece in the eurozone. Greece now has until Friday to request an extension and should they fail to do so, the bailout is due to expire on the 28th of February. In Japan, the Nikkei 225 Stock Average declined 0.4 percent. This came after the index finished above 18,000 for the first time since mid-2007 on Monday. Also in Australia, the S&P/ASX 200 index dropped 0.5%, while in South Korea the Kospi index declined 0.3 percent. Breaking the trend was the Shanghai Composite index which advanced 0.82%. On Wednesday, the Bank of Japan (BoJ) will announce its latest monetary policy views. This will then be followed by the minutes of the last meeting of the Reserve Bank of Australia when interest rates were cut to a record low of 2.25% on concerns about the pace of economic growth. On Wednesday, the markets in mainland China will be closed for the Lunar New Year break.
In Asian trade on Tuesday, the U.S. dollar (USD) traded higher against the Japanese yen (JPY). This came in response to afternoon selling of the JPY as a result of a smooth government bond auction. The Japanese Ministry of Finance reported that they had sold ¥1.1 trillion in 1.2% 20-year bonds with a lowest price of ¥98.80 yielding 1.275%. This was significantly higher than street forecasts and the bid-to-cover ratio improved from 3.26 at the last tender to 3.51. The USD/JPY traded up from ¥118.44 late Monday to ¥118.52. Earlier in the session, the USD lost momentum against the JPY which caused investors to turn to the yen as a safe haven asset. This pushed the greenback down at one point to as low as ¥118.23. The USD then regained most of its earlier losses as investors covered their short positions. The USD also traded flat against the euro with EUR/USD trading at $1.1361 from $1.1347 reached late on Monday. Meanwhile, the WSJ Dollar Index, which measures the greenback against a basket of major currencies, was at 85.35, down 0.07 percent.
In early trade on Tuesday, Australian stocks traded lower. This came in response to poor performance among financial sector shares as well as a mixed bag of corporate updates and earnings reports. The S&P/ASX 200 index traded down 0.6 percent and this was caused by a decline in the Australia & New Zealand Banking Group (ANZ) which lost 2.7 percent after reporting a smaller interest margin as well as a flat quarterly profit. Meanwhile, other major financials fell and the Bank of Queensland Ltd. traded down 1.1% while the Commonwealth Bank of Australia also declined 2.5 percent. This came as the bank’s stock traded without rights to the latest dividend. Despite a decline in the financial sector, miners got a boost as a result of additional gains for iron-ore spot prices. The shares of Rio Tinto Ltd. rose 0.5 percent while the shares of BHP Billiton Ltd also advanced 0.2 percent. Other companies which reported earnings included Coca-Cola Amatil Ltd. which posted full year profit which was more than three times the profit total in 2013. As a result, the shares of the company rallied 4.6 percent after the report. Also, the shares of Amcor Ltd. advanced 2.5 percent after posting a 7 percent increase in its net income.
On Tuesday, the prices of Brent crude continued their rally above $62 a barrel. This came in response to a warning by the IEA (International Energy Agency) regarding supply risks in the Middle East. According to the IEA, as a result of the rise of IS (Islamic State) in Syria and Iraq, this has created a major challenge regarding investments in the region needed in order to prevent an oil shortage over the next ten years. By 0647 GMT, Brent crude futures traded at $62.09 a barrel, up 69 cents while U.S. WTI crude oil also traded up at $53.26 a barrel, up 48 cents.