(Reuters) - Asian shares fell on Monday as high oil prices raised concerns about global growth, while signs of fresh steps from the Group of 20 major economies to contain the euro zone debt crisis underpinned the euro.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.6 percent, led by the materials sector <.MIAPJMT00PUS>. Japan's Nikkei average <.N225> bucked the pan-Asia trend to hit a seven-month high, closing midday up 0.5 percent, as a weaker yen boosted battered exporters.
Oil prices held near a 10-month high on Monday due to supply concerns as tensions over Iran's disputed nuclear programme worsened, while the rise in oil weakened the outlook for industrial metal demand and pushed copper futures lower.
A rise in oil prices drags the economy and weighs on growth around the world, said Bob Takai, general manager of Sumitomo Corp's energy division.
The rise in oil will have a wider global impact -- and a negative one -- and won't be contained to just the Middle East, while the European issue appears to be contained within the region, he said.
Leading economies urged Europe to strengthen a firewall to fight its debt crisis if it wants more help from the International Monetary Fund, putting pressure on Germany to drop its opposition to a bigger European bailout fund. Euro zone countries, on the other hand, pledged to reassess their bailout fund in March.
Euro zone powerhouse Germany said on Saturday the government will decide whether to boost the European bailout fund in March and its parliament is very likely to support any decision for more resources.
The affirmative nuance for beefing up the IMF's funding ability lit the fire on 'risk-on' trade, boosting the euro against the dollar and the yen, said Yuji Saito, director of the foreign exchange division at Credit Agricole Bank in Tokyo.
Recovery in risk positive sentiment is prompting investors to cover positions which they had shorted, he said.
The euro held steady around $1.3453. The single currency rose to its highest since early December of $1.3487 on Friday. Earlier on Monday, the euro jumped to near 110 yen to a four-month high, while the dollar hit a nine-month high against the yen of 81.66 yen. But dollar/yen and cross/yen pulled back from intraday highs on profit-taking.
GREECE LAUNCHES DEBT SWAP
Greece undertook scheduled steps after securing a much-needed bailout fund, formally launching the bond swap offer to private holders of its bonds on Friday, setting in motion the largest-ever sovereign debt restructuring in the hope of getting its finances back on track.
Greece has set a March 8 deadline for investors to participate in its unprecedented bond swap, according to a document outlining the offer.
This week's focus in gauging whether the relative calm in the markets will last is the European Central Bank's second refinacing operation set for Wednesday. The ECB's aggressive injection of funds into the system has removed concerns about a liquidity crunch in Europe and pushed down yields on lower-rated euro zone sovereign debts.
Interpreting the outcome will be difficult, though, as a high number could be seen as good in the sense that banks may be raising cheap money to lend, or bad in the sense that they are dependent on the ECB for funding, said Shane Oliver Head of Investment Strategy at AMP Capital Investors.
Regardless of the outcome, the very existence of cheap ECB funds for 3 years has substantially reduced the risks around the European banking system, he said.
The spike in oil prices, driven by heightening tension between Iran and the West, has raised concerns about damage to the fragile global economy.
Brent crude was down 0.2 percent but held above $125 a barrel on Monday, after jumping $1.85 a barrel to settle at $125.47 on Friday, its fifth day of gains. U.S. crude futures also eased 0.2 percent to $109.51 a barrel on Monday, after rallying nearly 2 percent on Friday to settle at $109.77 a barrel, the highest settlement since May 3.
London copper fell 0.6 percent to $8480.50 a tonne.
Asian credit markets turned cautious, with the spreads on the iTraxx Asia ex-Japan investment-grade index tightening by 1 basis point, compared to a tightening of about 3 basis points earlier.
(Additional reporting by Ian Chua in Sydney; Editing by Richard Pullin and Michael Perry)