Asian shares surrender gains in early trade Tuesday as oil prices retreat(Update)

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, after earlier rising 0.4 percent to its highest level since Jan. 8. Japan's Nikkei pared morning gains to trade up 0.1 percent.

SINGAPORE/TOKYO: Asian shares retreated from a seven-week high on Tuesday as the oil price rally that boosted global equity markets reversed, while the euro and sterling were hit by uncertainty over Britain's membership in the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, after earlier rising 0.4 percent to its highest level since Jan. 8. Japan's Nikkei pared morning gains to trade up 0.1 percent.

Oil markets jumped as much as 7 percent on Monday as speculation about falling U.S. shale output fed the notion that crude prices may be bottoming after their 20-month collapse.

But they retreated on Tuesday on concern that any cuts to U.S. production may be countered by rising output from Iran.

Both U.S. crude futures and the international benchmark Brent retreated 1.4 percent on Tuesday.

Short-covering in oil began last week after Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January's highs.

"The oil market seems to have become firmer recently," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

But while the market seems to like the fact that top producers are starting to take action to rein in supply, it "remains questionable' whether such moves will have a real impact, he said.

Monday's strength in oil prices drove the S&P 500 Index <.SPX> up 1.45 percent to 1,945.50 overnight, close to this month's high of 1947.20, led by a 2.2 percent increase for the energy <.SPNY> sector.

The volatility index <.VIX>, which measures implied volatility of stock options and is often seen as investors' fear gauge, fell below 20 percent to the lowest closing level since early January.

Spot iron ore for immediate delivery to China's Tianjin port <.IO62-CNI=SI> jumped seven percent on Monday to hit its highest level since late October.

Copper also gained 1.6 percent to $4,694 a tonne, near its one month high of $4,720 touched in early February. But it fell back 0.7 percent to $4,661 on Tuesday.

The strength in resources on Monday helped commodity-linked currencies such as the Australian dollar scale a seven-week high of $0.7248 . It pulled back a little and was last at $0.7222 on Tuesday.

The British pound remained vulnerable a day after falling nearly 2 percent, its biggest one-day drop in almost six years, on worries Britain may leave the European Union.

The pound hit a seven-year low of $1.4057 on Monday, after London Mayor Boris Johnson, one of the country's most popular ruling party politicians, announced his support for Britain to leave the EU in a June referendum.

The British unit last stood at $1.4114.

The euro also fell to $1.10035 on Monday, its lowest in almost three weeks, on fears "Brexit" could undermine the European project.

The common currency recovered to $1.10420 on Tuesday.

"Fears of Brexit have relegated the GBP to the bottom of the leader board," said Rodrigo Catril, FX strategist at National Australia Bank.

"The euro was also an underperformer against the USD, suggesting the market is expressing some concerns for the euro if the UK chooses to leave the European Union."

As shares retreated, the dollar also gave up its earlier gains against the yen. It slumped 0.6 percent to 112.205 yen , after opening at 112.87.

The dollar's index against a basket of six major currencies <.DXY> <=USD> hit a three-week high of 97.60 on Monday but slipped back to 97.254.- Reuters

Earlier Report:

TOKYO: Asian shares rose to a seven-week high on Tuesday as investors took heart from signs of life in battered energy and commodity markets while European currencies are hampered by worries Britain could exit the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, hitting its highest level since early January. Japan's Nikkei went up 0.8 percent, led by steelmakers and other commodity-related shares.

Wall Street saw S&P 500 Index gaining 1.45 percent to 1,945.50 overnight, edging near this month's high of 1947.20, led by a 2.2 percent increase for the energy sector.

The volatility index <.VIX>, which measures implied volatility of stock options and is often seen as investors' fear gauge, fell below 20 percent, hitting the lowest closing level since early January.

Spurring a more positive mood across continents were hopes that the worst may be finally over for battered commodity markets.

Oil markets jumped as much as 7 percent on Monday as speculation about falling U.S. shale output fed the notion that crude prices may be bottoming after their 20-month collapse.

Short-covering in oil started since last week after Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January's highs.

"The oil market seems to have become firmer recently. While the it remains questionable the latest measure by the top producers will have a real impact, the market seems to like the fact that they are starting to take action," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

U.S. crude futures traded at $33.31 a barrel in early Asian trade on Tuesday.

The international benchmark Brent finished up $1.68, or 5 percent, at $34.69 on Monday.

Other commodities are also recovering from multi-year lows. Copper rose 1.6 percent on Monday to $4,694 per ton, edging near its one month high of $4,720 touched in early February.

The spot iron ore for immediate delivery to China's Tianjin port <.IO62-CNI=SI> jumped seven percent on Monday to hit its highest level since late October.

That helped commodity-linked currencies such as the Australian dollar, which hit a seven-week high of $0.7248 on Monday. It last stood at $0.7230.

On the other hand, the British pound licked wounds a day after falling nearly 2 percent, its biggest one-day drop in almost six years, on worries Britain may leave the European Union.

The pound hit a seven-year low of $1.4057 on Monday, after London Mayor Boris Johnson, one of the country's most popular ruling party politicians, announced his support for Britain to leave the EU in a June referendum.

The British unit last stood at $1.4150.

The euro also fell to $1.10035 on Monday, its lowest in almost three weeks, as "Brexit" could hardly be a good news for the European project either.

The common currency stood at $1.1027 in early Asian trade.

"Fears of Brexit have relegated the GBP to the bottom of the leader board," said Rodrigo Catril, FX strategist at National Australia Bank.

"The euro was also an underperformer against the USD, suggesting the market is expressing some concerns for the euro if the UK chooses to leave the European Union."

The dollar also maintained a small gain against the yen to trade at 112.96 yen , compared to around 112.55 yen at the start of week.

The dollar's index against a basket of six major currencies <.DXY> <=USD> hit a three-week high of 97.60 on Monday and last stood at 97.368.- Reuters

Earlier Report: