Asian Markets Edge Down on Europe Fears

Asian markets mostly slipped on Wednesday as unease over the eurozone debt crisis overshadowed a strong rise in consumer confidence in the United States.

On the first full day of trade after Christmas eyes were on Italy, which will hold a debt auction later amid weakened confidence after lenders in Europe deposited a record amount with the central bank rather than lend to each other.

Tokyo fell 0.20 percent, or 16.94 points, to 8,423.62, Sydney fell 1.25 percent, or 51.6 points, to 4,088.8 and Seoul shed 0.92 percent, giving up 16.90 points to 1,825.12.

Hong Kong slipped 0.59 percent, or 110.50 points, to 18,518.67, although Shanghai staged an afternoon rally to end up 0.18 percent, or 3.81 points, at 2,170.01.

Dealers were given a positive cue from the United States, where another batch of upbeat data indicated a brighter outlook for the world's biggest economy.

The Conference Board reported a strong surge in consumer confidence this month, with its monthly index surging back to its levels of early 2011 after the collective mood soured deeply in the middle of the year.

"This is traditionally a good time of the year for equities, but we have 20 billion euros of Italian government debt being auctioned in the next two days, so there is some event risk which will probably cap any gains," IG Markets institutional dealer Chris Weston said.

Italy's bond auction is seen as a gauge of whether Rome's debt will be purchased by European banks after the European Central Bank's cash infusion last week.

The yields on benchmark 10-year bonds are sitting at the crucial seven percent level seen as unsustainable for governments to service their debts.

Adding to investor concerns about a possible credit crunch in Europe was news that the region's banks deposited a record amount of overnight funds at the European Central Bank Monday.

Lenders put 411.8 billion euros ($535 billion) on deposit for 24 hours at the ECB, beating the previous record of 384.3 billion euros seen in June 2010, showing that banks continue to be reluctant to lend to each other on the interbank market.

Last week, more than 500 banks borrowed a record 489.2 billion euros from the ECB in a new three-year lending facility.

On forex markets, the dollar stood at 77.77 yen, from 77.88 in New York late Tuesday.

The euro was at $1.3069 and 101.68 yen, compared with $1.3070 and 101.77 yen in New York.

Oil was mixed after surging Tuesday on Iran's warning that it could shut down the strategic Strait of Hormuz if the West applies sanctions on Iran's oil exports.

New York's main contract, light sweet crude for February delivery, gained eight cents to $101.42 per barrel in the afternoon.

Brent North Sea crude for February delivery shed 18 cents to $109.09.

Gold stood at $1,586.50 an ounce at 0810 GMT, compared with $1,597.27 late Tuesday.

In other markets:

-- Taipei fell 0.40 percent, or 28.36 points, to 7,056.67.

Leading IC design house MediaTek fell 1.25 percent to Tw$275.5 while Taiwan Semiconductor Manufacturing Co was 0.26 percent higher at Tw$75.7.

-- Manila closed down 0.57 percent, or 24.80 points, at 4,336.63.

Banco de Oro shed 0.2 percent to 58.50 pesos, power producer First Gen was down 2.6 percent at 14.30 pesos and Philippine Long Distance Telephone shed 0.5 percent to 2,518 pesos.

-- Wellington rose 0.67 percent, or 21.40 points, to 3,236.90.

Air New Zealand gained 3.37 percent to NZ$0.92, Contact Energy was unchanged at NZ$5.10 and Telecom jumped 2.50 percent to NZ$2.05.