* Dow plunge to 21-month low rattles Asia investors
* Oil at $140 a worry for many companies, policymakers
* U.S. dollar slides, gold rises, on concern about growth
By Kevin Plumberg
HONG KONG, June 27 (Reuters) - Asian stocks fell sharply
and safe-haven government bonds climbed on Friday after shares
plunged on Wall Street and oil prices shot above $140 a barrel,
fanning investors' fears of high inflation and slowing economic
growth.
The U.S. dollar hovered near three-week lows against the
euro on fresh signs of weakness in the world's largest economy,
pushing up gold prices to the highest in a month.
Stocks with brand names known well overseas such as Honda
Motor Co <7267.T>, Sony Co <6758.T> and Samsung Electronics
<005930.KS> tumbled following a 3 percent drop in the Dow Jones
industrial average <> to a 21-month low.
Goldman Sachs was one of the triggers for negative
sentiment after the brokerage forecast more credit-related
write-downs at Citigroup <C.N> and Merrill Lynch & Co <MER.N>
and urged investors to sell struggling automaker General Motors
<GM.N>.
"A stronger yen, higher oil prices and a sharp drop in
General Motors <GM.N> shares are negative for exporters,"
Kazuhiro Takahashi, general manager of equity marketing at
Daiwa Securities SMBC in Tokyo.
All but 15 of the 225 stocks on Japan's Nikkei share
average were declining, with the overall index down 2 percent
<>.
The MSCI index of stocks in the Asia-Pacific region
<.MIAPJ0000PUS> outside of Japan fell 1.9 percent to a
three-month low, while the pan-Asia index slipped 1.6 percent
<.MIAS00000PUS> also to the lowest since March.
Korea's KOSPI <> fell 2 percent and shares in
Australia were off 2.4 percent <> as the wave of selling
washed over Asia.
Oil prices were trading slightly lower around $139.25 after
rising to a record high above $140 a barrel on comments from
Libya that said it was studying possible cuts in output in
response to potential U.S. actions against OPEC countries.
Crude has surged 45 percent so far this year, raising costs
for businesses, consumers and governments and confounding
central banks that are struggling to balance rising global
inflation with economic sluggishness.
Even Japan, which battled deflation for years, found that
annual consumer inflation accelerated to a decade-high in May
on surging energy costs, and household spending dipped as the
job market stagnated, darkening the outlook for the world's
second-largest economy.
The benchmark 10-year Japanese government bond yield
<JP10YTN=JBYC>, which moves inversely to the price, dipped 3.5
basis points to 1.610 percent, having fallen more than 20 basis
points in the last two weeks.
The dollar was steady near a three-week low against the
euro as sentiment on the U.S. currency continued to worsen. The
euro was at $1.5744 <EUR=>, near Thursday's high just above
$1.5760.
Against the yen, the dollar was at 106.85 yen <JPY=>.
"Sentiment for the dollar has turned bearish as a drop in
stocks and record highs in oil prices reinforced worries about
the financial sector and the economy," said a senior trader at
a European bank.
Only a day ago Asian shares were supported by comments from
the Federal Reserve downplaying the potential for a deeper U.S.
economic slowdown, but crude prices and volatility in equity
markets are causing some investors to question that
supposition.
Fresh U.S. economic data also painted a gloomy picture. The
government reported that a four-week average of new jobless
claims, a measure of underlying labor trends, rose to its
highest since October 2005 in the aftermath of Hurricane
Katrina.
Sales of previously owned U.S. homes rose in May and the
glut of homes for sale shrank, but prices were off sharply from
a year ago, suggesting the housing sector remains a big weight
on the economy.
The data prompted investors to reduced their expectations
for a Federal Reserve interest rate rise this year, putting
more pressure on the ailing dollar.
Gold <XAU=> rose to $914.45/915.45 an ounce from
$912.60/913.60 late in New York on Thursday, when it rallied to
$917.20 -- its highest level since May 27.
