TOKYO (Reuters) - Asian shares steadied in quiet pre-holiday trade after a slump late last week, with markets cautious over whether the United States can avoid a fiscal crisis.
MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was up 0.6 percent after falling to a near two-week low on Friday when House of Representatives Speak John Boehner failed to gain support for a tax plan, raising fears the U.S. may not be able to avert the "fiscal cliff" of automatic spending cuts and tax increases set to start January 1.
The White House on Friday tried to rescue stalled talks but there was little headway as lawmakers and President Barack Obama abandoned Washington for Christmas.
Many market players still expect both sides to reach a compromise before the end-year deadline but heightening tensions were likely to stifle trade already slowed by the holidays.
U.S. Treasuries gained a safety bid on Friday from fiscal cliff worries, which put many investors on edge and drove down global equities markets, the euro and oil futures.
Australian shares <.axjo> rose 0.4 percent early on Monday, but trade was extremely thin, with Monday's session shortened ahead of the two-day Christmas holiday and many players already out on vacation.
South Korean shares opened up 0.2 percent.
"Investors will cut positions in response to the U.S. budget uncertainty, as the year-end deadline for a fiscal deal is just around the corner," said Lee Jae-hoon, an analyst at Mirae Asset Securities.
"A last-minute agreement, if it is reached, will be cheered by investors. But the deal looks ... difficult," Lee said.
Japanese financial markets are closed for a public holiday and will resume trading on Tuesday. Japan's Nikkei average <.n225> dropped 1 percent on Friday to close below the key 10,000-mark it reclaimed for the first time since early April on December 19. <.t/>
The dollar inched up 0.2 percent to 84.43 yen, having fallen below 84 yen on Friday. The dollar hit a 20-month high of 84.62 yen on December 19.
The yen has been pressured by expectations the Bank of Japan will be pressured to adopt more drastic monetary stimulus measures next year as incoming prime minister Shinzo Abe has demanded bolder action by the central bank to bring Japan out of decades-long deflation.
Currency speculators increased their bets against the U.S. dollar in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. Bets against the yen fell after reaching a more than five-year peak.
The euro stood steady around $1.3184.
In Italy, Mario Monti announced on Sunday he would consider seeking a second term as Italian prime minister if approached by allies committed to backing his austere brand of reforms. Monti resigned on Friday but has faced growing calls to seek a second term at a parliamentary election on February 24-25.
At stake is the leadership of the world's eighth largest economy, where recession and public debt of more than 2 trillion ($2.6 billion) have aggravated investor concerns about growth and stability in the euro zone.
Italy faces a huge bond redemption in the first quarter of 2013 and its failure to secure funding could refuel concerns about sovereign financing not only in Italy but also similarly indebted Spain, hurting sentiment towards the euro.
(Additional reporting by Hyunjoo Jin in Seoul)
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