(Adds details, updates prices)
* Seoul shares fall; stock and bond futures up
* Euro near two-month lows on debt crisis
* Nikkei down; JGB futures gain
* Flight to safety supports gold
By Alex Richardson
SINGAPORE, Nov 24 (Reuters) - Asian shares steadied on
Wednesday from a sell-off following North Korea's deadly
shelling of a South Korean island, but tension on the divided
peninsula supported safe-haven assets such as gold, Japanese
government bonds and the dollar.
The euro languished near a two-month low as demand for
dollars combined with concerns that a rescue package for
Ireland will not be enough to stop a debt crisis picking off
more of the euro zone's most heavily indebted nations.
While Tuesday's artillery barrage was one of the most
serious incidents on the divided peninsula since the end of
the Korean War in 1953, market reactions to North Korean
sabre-rattling or outright aggression have tended to be
short-lived.
The Korean won fell around 2.5 percent
before clawing back a bit, but South Korean stock <KSc1>
and bond <KTBc1> futures edged up, and foreign
investors were net buyers of stocks on Seoul's main exchange.
"Korea trades at a discount to the region on a valuation
basis ... If you look back at the last five years when we've
had scares they were all seen as buying opportunities," said
Todd Martin, Asia equity strategist with Societe Generale.
"The rule among hedge funds and long-only funds is that
you let the market sell off and watch for your entry point."
Japan's Nikkei share average fell 0.9
percent, retreating from a five-month high and catching up
with regional markets after a break for a public holiday on
Tuesday.
MSCI's broadest index of Asia Pacific shares outside Japan
was flat, with gains in Hong Kong
, Shanghai and Singapore
offsetting falls in Australia
and South Korea .
U.S. stocks slid on Tuesday, rattled by the Korean
flare-up and ongoing debt woes in Europe, to which U.S. banks
have significant exposure. The S&P 500 index
dropping 1.4 percent and the CBOE Volatility Index
, Wall Street's "fear gauge", jumped 12.3
percent, its largest daily percentage gain in more than three
months.
Japanese government bond futures bounced from a two-month
low, with the 10-year benchmark <2JGBv1> up 0.14
point.
"Tensions in Korea are debt-positive in the short-run,
spurring investors away from riskier assets," said Koichi Ono,
a senior strategist at Daiwa Securities Capital Markets.
EYES ON IRISH
Currency markets remained more focused on Europe, where
Ireland's beleaguered coalition was due later in the day to
set out a four-year plan to save 15 billion euros through
spending cuts and tax increases.
The bursting of a property bubble has taken Ireland's
banks to the brink if collapse and shredded the finances of a
government that agreed to back the lenders' liabilities.
Now investors fear a debt crisis that had already swamped
Greece will spread further -- the premium on Spanish
government bond yields over German benchmarks rose to a euro
lifetime high on Tuesday.
"Contagion from the Irish situation during the last few
months was largely limited to Greece and Portugal. Not any
more," wrote Matthew Strauss, strategist at RBC Capital
Markets, in a note.
The euro slumped 1.9 percent overnight to
as low as $1.3359 and was trading around $1.34 on Wednesday.
The dollar index , which measures its
performance against a basket of currency, rallied to levels
not seen since late September.
Gold was steady around $1,374 an ounce
after reaching a 1-1/2 week high of $1,382 in the previous
session.
U.S. crude oil futures <CLc1> rose 37 cents,
around 0.5 percent, to $81.62 a barrel.
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
(Editing by David Fox)
