Asian markets edged lower Tuesday with stocks in Seoul ending the session down 2 percent after North Korea threatened to launch more missiles while investor doubts about the world economy kept riskier assets such as the euro under pressure.
North Korea further raised tensions after its nuclear test on Monday, though analysts believe the market impact will be short-lived in a region growing accustomed to Pyongyang's actions.
The U.S. dollar edged higher against major currencies, but not too far off its recently hit lows for the year. U.S. Treasury auctions this week will test the allure of dollar assets at a time of growing worries about the country's deficits.
The greenback was routed last week on fears that the United States would lose its top AAA rating due to its widening debt levels. The dollar index, a gauge of the greenback's performance against six big currencies, edged up 0.17 percent to 80.158, though that was not too far off a five-month trough of 79.805 hit on Friday. Crude retreated to below $61 a barrel ahead of OPEC's meeting on Thursday that is expected to result in no changes to oil supply.
Japan's Nikkei 225 Average ended 0.4 percent lower, weighed by tech shares such as TDK Corp, though slides were checked by defensive shares such as drugmakers and communications companies. Toyota Motor edged up after a brokerage upgrade, while GS Yuasa rose after the Nikkei business daily reported that the lithium-ion battery maker will build a new factory with Mitsubishi Motors and trading house Mitsubishi to produce batteries for electric vehicles.
Seoul shares underperformed the region, closing down 2 percent, pressured by reports North Korea was planning another missile launch, but Ssangyong jumped after GS Holdings said it would buy a 70 percent stake in the company. Shares in companies with interests in North Korea declined. Romanson, a watchmaker that has a production unit in the Kaesong industrial park in the North, tumbled 9.5 percent, and Ehwa Technologies Information, a power supply equipment maker that is a strong potential supplier for much-hoped-for North Korea infrastructure projects, tumbled 14 percent at the finish line.
Australian stocks rebounded from early lows to close up 1.4 percent, as iron ore miners jumped after Rio Tinto announced a 33 percent cut in iron ore prices to Japan's Nippon Steel. Bigger rival BHP Billiton, the world's biggest miner, added 1.2 percent, while iron ore miner Fortescue Metals Group jumped 4.4 percent. Earlier a top Rio official said there were signs of a pick-up in Chinese iron ore demand.
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Hong Kong shares closed 0.8 percent lower, following a weak start on most major regional markets, but property stocks held strong, buoyed by more optimistic forecasts on home prices for the second half of 2009.
Singapore's Straits Times Index slipped 1.3 percent. But Keppel Corp gained after J.P. Morgan raised its target price, citing the sale of Keppel's entire stake in Singapore Petroleum Company for $1 billion.
China's Shanghai Composite Index lost early gains to decline 0.8 percent, in low volume, with gains in renewable-energy companies restrained by declines in coal miners.