By Rafael Nam
HONG KONG, Feb 6 (Reuters) - Asian stocks suffered their
biggest fall in two weeks on Wednesday after much
weaker-than-expected service sector data in the United States
and Europe fueled fears of recession, sending investors fleeing
to safer bonds.
Financial shares such as Mitsubishi UFJ Financial Group
<8306.T> were among the biggest decliners after Standard &
Poor's on Tuesday warned the ratings of U.S. banks could be at
risk should bond insurers be downgraded. []
But trading in Asia was thinner than usual, with markets in
South Korea, Taiwan, and China closed on Wednesday until the
remainder of the week in what has been a less than festive
start to the Lunar New Year holidays.
Losses looked set to spread to European markets as well,
with Britain's FTSE 100 <> seen opening down 0.7 percent,
while Germany's DAX <> and France's CAC 40 <> were
seen down about 1 percent each, according to financial
bookmakers.
"It cannot be helped. The market is being hit by U.S.
recession fears," said Yoshihiro Ito at Okasan Capital
Management in Tokyo.
"The impact of subprime (mortgage) problems is spreading
into the broader U.S. economy," Ito added.
The MSCI's measure of Asian stocks excluding Japan
<.MIAPJ0000PUS> dropped 3 percent by 0700 GMT, on its way
towards its biggest decline since losing 6.3 percent on Jan.
22, a day when investors had feared a protracted bear market
was at hand.
The index suffered in January its worst percentage fall
since September 2001, and was down around 12 percent for the
year in afternoon trade.
Markets worldwide have buckled this year amid concerns that
the sharply slowing U.S. economy will drag on global growth and
on signs of more subprime-mortgage related problems in the
financial sector.
Data out on Tuesday piled on yet again to the list of
investors' worries, showing the vast U.S. services sector
unexpectedly retrenched to recessionary levels in January,
while euro zone services growth slowed to a near-halt.
[]
Tokyo's benchmark Nikkei index <> slumped 4.7 percent
on the bearish data, while Singapore <.FTSTI> fell 3.5 percent.
Hong Kong's blue-chip index <> tumbled 5.4 percent in a
half-day session ahead of the Lunar New Year that starts on
Thursday for Indonesia, Malaysia and Singapore.
Exporters such as Canon Inc <7751.T> slumped amid concerns
about declining overseas sales, as did regional financial firms
such as Australia's Allco Finance <AFG.AX>.
Australian stocks <> also fell, hurt by a 7.5 percent
decline in BHP Billiton <BHP.AX> after the world's biggest
miner launched a hostile $147.4 billion bid for rival Rio Tinto
<RIO.AX>. [].
China's state-owned aluminium giant Chinalco and its
partner Alcoa Inc <AA.N>, which last week surprised markets by
taking a 9 percent stake in Rio, said they were analysing BHP's
bid but that there would be no quick reaction. []
Still, concerns about a pricey counterbid sent shares in
Chinalco's listed subsidiary Aluminum Corp of China Ltd
<2600.HK> down 7.2 percent.
FLEEING FOR SAFETY
Investors opted for safety, with Japanese government bond
futures posting their biggest one-day gain since mid-August,
when the global credit crunch erupted, as slumping equities
encouraged safe-haven buying. March 10-year futures ended up
0.88 point at 138.08
Gold bounced back after falling a day earlier to its lowest
level in almost two weeks, with spot prices <XAU=> last quoted
at $892.25/893.15 an ounce. Platinum <XPT=> rose to
$1,781/1,786 in Asian trade.
The Japanese yen <JPY=> edged up against the dollar and the
euro <EUR=> amid reduced demand for carry trades, when
investors borrow low-yielding currencies to fund purchases of
riskier assets with potentially higher yields, such as stocks
or commodities.
Oil prices <CLc1> extended their decline to hover at $88 a
barrel as the weak U.S. economic data reinforced fears that the
world's largest economy is on the brink of a recession.
