Hong Kong – Agencies
Regional shares were hit on Monday after Nicolas Sarkozy's poor showing in the first round of France's presidential election at the weekend. While observers were unsure who would likely
win the run-off there are fears that if his opponent, socialist Francois Hollande, wins he could change strategy on dealing with the eurozone crisis.
Hollande has said he would move to renegotiate a regional fiscal pact agreed last year, shifting the focus toward growth rather than austerity, a move likely to stoke friction with other nations, including Germany.
Adding to uncertainty was the strong showing of the far right, which is opposed to the huge bailouts European nations including Greece, Ireland and Portugal have received.
The Netherlands was also thrown into turmoil when Prime Minster Mark Rutte and his cabinet resigned after his government failed to reach agreement over austerity measures to stabilise the economy.
There are now fears that the Netherlands' top-notch triple A credit rating -- one of only four left in the eurozone -- could be in danger.
Economic matters in the eurozone also weighed on sentiment after data showed private sector activity sank at its fastest rate in five months in April, indicating a longer recession than previously thought.
The composite Purchasing Managers Index (PMI) by research firm Markit fell to 47.4 compared with 49.1 in March. A score below the neutral 50-point line indicates contraction.
"The main dangers to the situation in Europe have been on display over the past couple of days," Ric Spooner, chief market analyst at CMC Markets said in a note.
"The French election campaign, weak manufacturing PMIs and Spanish 10 year bonds yields at around six percent are all indicators that make it hard for investors to increase risk appetite," he added, according to Dow Jones Newswires.
US shares fell Monday. On Wall Street the Dow sank 0.78 percent, the S&P 500 lost 0.84 percent and the Nasdaq slid 1.00 percent.
In early European trade Tuesday the euro fetched $1.3172 and 106.95 yen, compared with $1.3154 and 106.78 yen in New York late Monday.
The dollar was at 81.20 yen compared with 81.18 yen.
And on oil markets New York's main contract, West Texas Intermediate crude for delivery in June was up 11 cents at $103.22 per barrel while Brent North Sea crude for June fell 21 cents to $118.50.
Gold was at $1,639.05 an ounce at 1100 GMT, compared with $1,632.75 late Monday.
Asian markets were mixed on Tuesday as bargain hunting after the previous day's big losses was countered by nervousness about the political and economic situation in Europe.
Traders were also following losses on Wall Street and in European bourses while keeping an eye on central bank policy meetings in Washington and Tokyo this week, hoping for some fresh stimulus measures.
Tokyo fell 0.78 percent, or 74.13 points, to 9,468.04 and Seoul shed 0.47 percent, or 9.21 points, to 1,963.42, while Sydney added 0.18 percent, or 8.0 points, to 4,360.4.
Hong Kong added 0.26 percent, or 52.77 points, to end at 20,677.16 and Shanghai ended flat, edging down 0.24 points to 2,388.83.