A wave of risk aversion swept through global markets on Tuesday as worries about Greece's future in the euro and general end-of-year caution subdued shares and lifted the safe-haven yen and gold.

There was also a new 5-1/2 year low for oil prices CLc1LCOc1 as persistent worries about a global supply glut amplified the downward pressure of its pricing currency, the dollar .DXY, as it hovered near an 8-1/2 year high. [FRX/]

Europe's stock markets opened with Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC 40 .FCHI down 0.5, 0.6 and 0.8 percent respectively after a 1.6 percent drop for Tokyo's Nikkei .N225 had also seen Asia wilt overnight.

Bond markets were slightly brighter though, as Greece's bond yields GR10YT=TWEB, a proxy of the government's borrowing costs, steadied after spiking on Monday when it became clear the country would hold snap elections.

The left-wing Syriza party, which opposes Greece's EU/IMF bailout and which is leading in opinion polls, has said it wants to abandon the many of the drastic spending cuts that are central to Greece's rehabilitation program.

"The developments in Greece have prompted some concerns among global investors, at least in the near-term, which is boosting safe-haven demand for the yen," said Lee Hardman a FX strategist at Bank of Tokyo Mitsubishi.

"It's probably fair to say Greece could leave the euro and it would have less of an impact than in 2012, but it would be dangerous," he said.

The euro EUR= was holding just above a 2-1/2 year low against the dollar at $1.2171. Underscoring the euro zone's economic troubles, European Central Bank data showed banks had slowed lending to firms and households again in November.

OIL SLUMP

Oil prices, the other big focus for world markets at present, extended their sharp recent falls in early European trading as they dropped below $57 per barrel for the first time since May 2009.

Brent for February delivery LCOc1 fell 98 cents to $56.90 after hitting $56.74 earlier in the session, while U.S. crude CLc1 fell 77 cents to $52.84 a barrel. Both have fallen roughly 50 percent in the last six months.

An industry group, the American Petroleum Institute, is scheduled to release its inventory report later in the day ahead of U.S. Department of Energy data on Wednesday.

In the currency market, the cautious mood saw the yen JPY= make sharp gains against both the dollar and euro as investors sought the traditional safety of the Japanese currency.

It was up just over one percent at 119.45 yen to the dollar as the dollar itself held just below an 8-1/2 year high against six of the world's main currencies. .DXY

Europe's benchmark safe haven, the 10-year German Bund DE10YT=TWEB, meanwhile was heading for its biggest annual fall in yields since 2008 as it hovered at 0.55 percent in early trading. <GVD/EUR>

Gold also nudged higher but the dollar's broad-based strength meant more pain for othercommodities. Copper CMCU3 edged down to $6,280.25 a tonne, after falling to its lowest level in four-and-a-half years this week.

Worries about China's economy added downward pressure. Growth in China's manufacturing sector likely slowed to a 18-month low in December, a Reuters poll showed earlier.