GLOBAL MARKETS-Euro slips after German election, stocks ease

* Asian stocks fall on profit-taking, Nikkei down 0.6 pct

* Euro eases as German state election deals blow to Merkel

* ECB rate hike expectations limit euro’s decline

* Oil, gold fall, Middle East tension curbs losses

By Richard Leong

HONG KONG, March 28 (Reuters) – The euro slipped on Monday
after German Chancellor Angela Merkel’s conservatives were
routed in elections in a key state, while Asian shares fell as
turmoil in the Middle East and Japan’s nuclear crisis left
investors with little appetite for riskier assets.

European shares also dipped in early trade, while U.S.
stock index futures (SPc1: Quote, Profile, Research) pared initial gains to stand little
changed.

Investors in Asia booked profits on bank shares in Hong
Kong, computer maker stocks in Taiwan and in mining shares in
Australia, weighing on the region’s equity markets after those
sectors racked up solid gains over the last week.

However, most analysts reckoned Asian stock markets would
bounce back on foreign demand after the first quarter and
Japan’s fiscal year comes to a close later this week.

“There’s still room to rise as foreign buying on dips is
likely to continue, although trading may be directionless before
the end of the fiscal year,” said Hajime Nakajima, a wholesale
trader at Cosmo Securities in Tokyo.

Japan’s Nikkei finished down 0.6 percent. Shares
elsewhere in Asia were mainly weaker, with MSCI’s index of Asian
shares outside Japan easing 0.4 percent.

GERMAN ELECTION HURTS EURO

Merkel’s Christian Democrats lost power on Sunday in the
rich state of Baden-Wuerttemberg, where a rush of anti-nuclear
sentiment following Japan’s nuclear crisis mobilised voters
against the party, which has been supportive of nuclear power.

The loss of the regional stronghold could limit Merkel’s
ability to pass legislation as her coalition centre-right
government deals with nuclear power, military action in Libya
and the euro zone debt crisis. See [ID:nLDE72Q0E6]

While erosion of Merkel’s clout at home weighed on the euro,
prospects of a European Central Bank rate was an important
element holding up the single currency, Gibbs said.

“Clearly risks are rising, but not sufficient to tip the
euro over the edge yet. There’s also a range of support on the
way down, it’s not going to collapse even if it falls through
$1.40,” said Greg Gibbs, a strategist at RBS in Sydney.

The euro last traded at $1.4061 , compared with
$1.4065 late in New York on Friday. Early in the session, it was
marked down to around $1.4020.

Along with its gains versus the euro, the dollar firmed
against the yen , helped by Friday’s comments from a U.S.
central bank official who said the Federal Reserve is poised in
the “not-too-distant future” to begin rolling back its super
loose monetary policy to avert inflation.

Easier U.S. policy has helped boost global financial markets
by flooding them with cheap money in search of higher returns,
though it has also added to inflationary pressures in emerging
economies.

The U.S. dollar last traded at 81.70 yen, up from 81.43 late
Friday in New York.

Further Western air strikes in Libya and tension in Syria,
Yemen and Bahrain continued to fuel investor uneasiness over
supply disruptions from the oil-rich Middle East and from North
Africa, supporting so-called safe havens such gold.

Spot gold was last at $1,423.49 an ounce, down from
Friday and below a record high of $1,447.40 reached on March 24.
It still up about 2 percent since March 15.

U.S. crude oil futures (CLc1: Quote, Profile, Research) fell 30 cents to $105.09 a
barrel and Brent crude (LCOc1: Quote, Profile, Research) was down 26 cents at $115.33.

(Reporting by Ian Chua in SYDNEY, Ayai Tomisawa and Natsuko
Waki in TOKYO, Cho Mee-young in SEOUL and Rujun Shen in
SINGAPORE; Editing by Kim Coghill)

GLOBAL MARKETS-Euro slips after German election, stocks ease