Asia stocks retreat with Italy in focus; Nikkei slumps 0.3%

Investing.com – Asian stock markets were broadly lower in thin year-end trade on Thursday, as investors were reluctant to open new positions before the new year amid lingering concerns over the euro zone’s debt crisis.

During late Asian trade, Hong Kong's Hang Seng Index fell 0.7%, Australia’s S&P/ASX200 shed 0.4%, while Japan’s Nikkei 225 Index dipped 0.2%.

With most investors already away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and quiet trade.

Renewed concerns over the euro zone’s debt crisis weighed on appetite for riskier assets after Italy sold EUR9 billion of six-month bills on Wednesday, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November.

However, the sale failed to reassure markets after data showed Wednesday that the use of the European Central Bank's overnight deposit facility reached a new, all-time high of EUR452.03 billion on Tuesday, revealing that European lenders are still unwilling to lend to each other.

The news prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets.

The euro’s drop to a 10-year low against the yen weighed on exporters. A stronger yen reduces the value of overseas income at Japanese companies when repatriated dampening the outlook for export earnings.

Electronics manufacturer Sharp fell 3.2%, Honda Motors shed 0.8%, while chip-maker Elpida Memory tumbled 5.15% after the Asahi Shimbun reported the company may seek to delay repayment of government loans.  

Elsewhere, in Hong Kong, shares in the financial sector led losses, with Hong Kong-listed shares of Europe’s largest lender HSBC holdings dropping 1.35%, while China’s biggest bank Industrial and Commercial Bank of China slumped 1.5%.

Commodity-linked shares contributed to losses, tracking raw material prices lower. Gold producer Zijin Mining Group saw shares fall 2.4%, while oil giant CNOOC retreated 1%.

Looking ahead, the outlook for European stock markets was upbeat ahead of a sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022.

The EURO STOXX 50 futures pointed to a gain of 0.6%, France’s CAC 40 futures added 0.55%, Germany's DAX futures pointed to a rise of 0.5%, while London’s FTSE 100 futures edged up 0.2%.  

Later in the day, the U.S. was to release a weekly government report on initial jobless claims, as well as industry data on pending home sales and business conditions in the Chicago area.