Asia shares bounce from 3-month lows but Fed, Greece weigh

Tokyo (Reuters): Asian shares rebounded from three-month lows on Wednesday, though the spectre of higher borrowing costs in the United States and concerns about the apparent lack of progress in talks between Greece and its creditors sapped confidence.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% after hitting a fresh three-month low. At one point, it was down 9% from the seven-year peak hit in late April.

Japan’s Nikkei eased 0.1% to three-week lows while European shares were expected to dip further.

Spreadbetters expect Germany’s DAX, Britain’s FTSE and France’s CAC40 to fall 0.1-0.2%, a day after a pan-European stock index fell to a four-month low.

“Market players are reducing risk positions on caution about higher volatility in interest rate markets,” said Kyoya Okazawa, head of global equity and commodities at BNP Paribas in Tokyo.

Share markets around the world, particularly some emerging markets that have relied on foreign capital, have been hit on growing expectations that the U.S. Federal Reserve will start to raise interest rates before the year is out.

US bond prices slipped as they were also hit by this week’s flood of supply, sending the 10-year US benchmark bond yield to an eight-month high of 2.458% and last stood at 2.448%.

Strong US data, including Friday’s report showing solid increases in employment, and recent comments from top Fed officials suggesting a rate hike is likely later this year have driven up bond yields in the past several days.

Concerns about Greece also added to the nervousness.

A new reform proposal submitted by Athens earlier this week failed to fully satisfy creditors, heightening concerns about whether Greece can agree on a deal to unlock new funding to ward off a debt default.

In currency markets, the yen surged against the dollar and other currencies after Bank of Japan Governor Haruhiko Kuroda said the yen’s effective exchange rate is unlikely to weaken further.

The dollar fell to as low as 122.77 yen from the day’s high of 124.63 and last stood at 123.03.

US dollar was largely steady against other currencies. The euro traded little changed at $1.1296.