By Marc Jones
LONDON (Reuters) - A wave of risk aversion swept through global markets on Tuesday as worries about Greece's future in the euro and general end-of-year caution subdued shares and lifted the safe-haven yen and gold.
There was also a new 5-1/2 year low for oil prices
Europe's stock markets opened with Britain's FTSE 100 (FTSE), Germany's DAX (GDAXI) and France's CAC 40 (FCHI) down 0.5, 0.6 and 0.8 percent respectively after a 1.6 percent drop for Tokyo's Nikkei (N225) had also seen Asia wilt overnight.
Bond markets were slightly brighter though, as Greece's bond yields
The left-wing Syriza party, which opposes Greece's EU/IMF bailout and which is leading in opinion polls, has said it wants to abandon the many of the drastic spending cuts that are central to Greece's rehabilitation program.
"The developments in Greece have prompted some concerns among global investors, at least in the near-term, which is boosting safe-haven demand for the yen," said Lee Hardman a FX strategist at Bank of Tokyo Mitsubishi.
"It's probably fair to say Greece could leave the euro and it would have less of an impact than in 2012, but it would be dangerous," he said.
The euro <EUR/USD> was holding just above a 2-1/2 year low against the dollar at $1.2171. Underscoring the euro zone's economic troubles, European Central Bank data showed banks had slowed lending to firms and households again in November.
OIL SLUMP
Oil prices, the other big focus for world markets at present, extended their sharp recent falls in early European trading as they dropped below $57 per barrel for the first time since May 2009.
Brent for February delivery
An industry group, the American Petroleum Institute, is scheduled to release its inventory report later in the day ahead of U.S. Department of Energy data on Wednesday.
In the currency market, the cautious mood saw the yen <USD/JPY> make sharp gains against both the dollar and euro as investors sought the traditional safety of the Japanese currency.
It was up just over one percent at 119.45 yen to the dollar as the dollar itself held just below an 8-1/2 year high against six of the world's main currencies. (DXY)
Europe's benchmark safe haven, the 10-year German Bund
Gold also nudged higher but the dollar's broad-based strength meant more pain for other commodities. Copper
Worries about China's economy added downward pressure. Growth in China's manufacturing sector likely slowed to a 18-month low in December, a Reuters poll showed earlier.
(Additional Reporting by Lisa Twaronite in Tokyo; Editing by Jon Boyle)