* Global equity markets remain firmly in bear market
* Japanese government bond futures at 2-month high
* Short-term technical gauges show equity market oversold
By Kevin Plumberg
HONG KONG, July 10 (Reuters) - Asian stocks slipped and
government bond prices rose on Thursday on fears the credit
crunch dogging Wall Street will inflict more damage on the
region, already suffering from rising inflation.
High costs as a result of soaring oil prices and slower
growth have this week dragged down the MSCI benchmark world
equities index <.MIWD00000PUS> into a bear market, down 20
percent from an all-time high hit in November 2007.
In addition, a series of downward revisions to company
profit forecasts and data showing Singapore's economy shrank by
the most in five years have caused sentiment on Asian stock
markets to deteriorate. []
"Unless we see some kind of concerted move downwards in oil
prices ... markets are going to remain extremely concerned that
we're going to face a large threat from inflation," said Angus
Gluskie, portfolio manager at White Funds Management in Sydney.
"We're going to continue to see bad debt levels escalate in
the banking sector, but that's not unexpected, and loan growth
rates are certainly coming down," he added.
U.S. light crude inched up 0.3 percent to $136.41 a barrel
<CLc1> and is up 42 percent so far this year.
Japan's Nikkei share average <> fell 0.3 percent to a
three-month low, with weakness affecting a broad array of
companies including Canon Inc <7751.T> and brewer Sapporo
Holdings Ltd <2502.T>.
Shares of companies in the Asia-Pacific region excluding
Japan <.MSCIAPJ> were down 0.5 percent on the day and were a
little more than 2 percent away from lows reached in August
2007, when trouble in the U.S. subprime mortgage industry
turned into a global credit crisis.
BONDS STRONG
Economic growth remained the primary concern for bond
markets.
Japanese government bonds climbed, pushing futures to
two-month highs, as renewed credit jitters weighed on equity
markets and boosted the safe-haven appeal of debt.
Faltering world stock markets have deepened concerns about
the global and Japanese economies, and prompted Japan banks and
life insurers to return to bonds after enduring a fierce market
sell-off from late May to mid-June, analysts said.
"Falling U.S. stocks to new lows imply overall asset prices
there are falling as well, which in turn would deepen the
economic slowdown," said Tetsuya Miura, fixed-income strategist
at Shinko Securities.
"Such a view has been offsetting inflation worries and has
been behind the bond bull market since late June," he said.
September futures <2JGBv1> climbed as much as 0.65 point to
136.40, the highest since May 13, before retreating to 136.23.
Many traders were forced to cover their short positions in
futures when they rose above 136.00, analysts said.
The benchmark 10-year yield <JP10YTN=JBTC> fell 4.5 basis
points to 1.565 percent, a two-month low.
Stocks in the U.S. financial sector fell sharply overnight,
sucking the widely-tracked S&P 500 index <.SPX> down 20 percent
from an record high in October 2007 and confirming what has
indeed become a global bear market for equities.
OVERSOLD?
However, some short-term gauges of momentum and sentiment
suggested that markets in Asia, particularly Korea, have
reached extremes.
"Looking at a lot of the momentum indicators, they are in
oversold territory," said Lawrence Balanco, technical analyst
with CLSA in Hong Kong. "Sentiment has been quite negative but
we might be at an extreme and seeing some consolidation and
short covering with oversold indicators being as low as they
are," he said.
South Korea's benchmark KOSPI <> was largely unchanged
on the day after closing at a 14-month low on Wednesday.
Strength in shares of POSCO <005490.KS>, the world's
fourth-largest steel maker which is due to report results on
Friday, offset a selloff in the tech sector.
Hong Kong's Hang Seng index opened 1 percent lower <>.
The U.S. dollar was steady against major currencies after
falling the previous day on heightened geopolitical tensions
with Iran after the fourth-biggest oil exporter conducted a
long-range missile test.
The euro <EUR=> was at $1.5723, down 0.1 percent. Against
the yen, the dollar was at 106.80 yen <JPY=>, barely changed on
the day.
(Additional reporting by Geraldine Chua in SYDNEY and Satomi
Noguchi in TOKYO; Editing by Lincoln Feast)
