Asian shares extended losses on Tuesday, after news of a possible capital injection at the largest US savings and loan company failed to eliminate concerns about more bank writedowns and weakening company earnings. Gold futures hovered near a one-week high as rising crude prices again stirred inflation fears, while Japanese government bond futures and Treasuries climbed. The euro rose against the dollar and the yen as investors sought higher yielding assets in the face of steady euro zone rates and potentially lower interest rates in the United States. European markets were set to open lower, with financial bookmakers in London predicting Britain's FTSE 100 index will open up to 0.6 percent lower, Germany's DAX 0.7 percent lower and France's CAC-40 up to 0.9 percent lower. Hopes that the global credit crisis may be easing were boosted on Wall Street by news that Washington Mutual Inc was close to securing a $5 billion investment. But concerns that the US recession, rising energy and raw material costs, and the credit crunch will hurt company earnings weighed on sentiment. Banks and other financials were pressured by nagging worries about further writedowns. Australia and New Zealand Banking Group Ltd fell in Sydney, and Mizuho Financial Group slipped in Tokyo. “Their earnings risk is considerably higher than it used to be,” said Eric Betts, equities strategist at Nomura Australia. “They are getting squeezed on the margin side and corporate bad debts are on the rise. They are putting up rates but that might slow credit growth.” Tokyo's benchmark Nikkei index ended down 1.5 percent, having hit a five-week high on Monday. Some investors were holding back ahead of economic indicators, such as Japanese machinery orders later this week. Stocks elsewhere in Asia, as measured by MSCI's index were down 0.7 percent by 0556 GMT. Asia ex-Japan stocks are down 10 percent this year. Seoul's KOSPI index fell 1.1 percent, Taipei's TAIEX slipped 0.7 percent, and Hong Kong's Hang Seng dipped 0.5 percent. Sydney's S&P/ASX 200 index fell 0.4 percent. On Wall Street on Monday the Dow Jones industrial average ended flat. Alcoa was the biggest drag on the benchmark ahead of its earnings. After the close, the aluminium producer missed expectations by 5 cents a share, saying higher energy costs and a weak dollar ate into its profit. US stock index futures pointed to a lower opening in New York later. Oil traded just below $109 a barrel, easing slightly from a $3 dollar rush higher in the previous session after concerns over disruptions to diesel supply mounted following a fire at a European refiner. US crude was 25 cents lower at $108.84 a barrel – just 2 percent off a record high. Gold traded at a one-week high, after the oil rally stirred inflation worries. Spot gold, traditionally seen as a hedge against oil-led inflation and an alternative investment to currencies, changed hands at $917.90/918.80 an ounce. In currency markets the dollar remained on the back foot, as last week's jobs data deepened worries about a US recession, while players eyed comments from G7 euro zone officials about the strength of the euro. The euro rose to 161.02 yen and $1.5735 while the dollar slipped to 102.34 yen. “The dollar is weak overall and this is not disorderly given the US fundamentals. With the prospect of further declines in US interest rates, it makes sense that few want to buy the dollar right now,” a dealer at a European bank said. __
