Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, May 29, 2017. REUTERS/Staff/Remote
Concerns about situations involving Greece, Italy and the European Central Bank kept the euro under pressure on Tuesday.
European geopolitical fears sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays.
For Tuesday, European stock markets were set for a soft start, with financial spreadbetter IG Markets expecting Britain's FTSE .FTSE and France's CAC 40 .FCHI to open 0.15 percent and 0.3 percent lower, respectively, and Germany's DAX .GDAXI to start the day flat.
The euro EUR=EBS slid 0.45 percent to $1.1114 in its fourth session of declines.
James Woods, global investment analyst at Rivkin Securities in Sydney, attributed most of the currency's decline on Tuesday to a German press report saying Athens may opt out of its next bailout payment if creditors cannot strike a debt relief deal.
"The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone," Woods said.
However, he cautioned against reading "too much into it" without more details or confirmation, adding it was unlikely Greece would forgo the bailout payment at this stage.
Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to aim to do both at their June meeting.
Comments by former Italian Prime Minister Matteo Renzi on Sunday in favor of holding an election at the same time as Germany's in September also raised uncertainty and pulled the euro lower.
So did a statement by European Central Bank President Mario Draghi reiterating the need for "substantial" stimulus given subdued inflation.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.2 percent with U.S. and British markets closed on Monday.
China, Hong Kong and Taiwan markets are closed for holidays on Tuesday.
Japan's Nikkei .N225 ended flat, held back by a stronger yen.
South Korea's KOSPI .KS11 fell 0.4 percent as investors took profits following the market's record-breaking rally this month.
North Korean leader Kim Jong Un supervised Monday's test of a new ballistic missile controlled by a precision guidance system and ordered the development of more powerful strategic weapons, the North's official KCNA news agency reported on Tuesday.
South Korea said it had conducted a joint drill with a U.S. supersonic B-1B Lancer bomber on Monday. North Korea's state media earlier accused the U.S. of staging a drill to practice dropping nuclear bombs on the Korean peninsula.
European blue-chip stocks .STOXXE fell 0.2 percent on Monday, with Italy's banking index sliding 3.4 percent, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.
Sterling GBP= retreated 0.2 percent to $1.2809 after British Prime Minister Theresa May's lead over the opposition Labour Party dropped to 6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans.
The dollar declined 0.4 percent to 110.88 yen JPY=.
The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, however, advanced 0.3 percent to 97.751.
Markets are awaiting economic indicators including French first quarter gross domestic product, German inflation data for May, and U.S. inflation for April later in the session.
In commodities, oil prices retreated, as concerns lingered about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices.
U.S. crude futures CLc1 slipped about 0.1 percent to $49.78 a barrel.
Global benchmark Brent LCOc1 fell 0.4 percent to $52.09.
Gold XAU= rose 0.1 percent to $1,268 an ounce.
(Reporting by Nichola Saminather; Editing by Kim Coghill and Richard Borsuk)
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