By Nina Mehra
HONG KONG, Jan 11 (Reuters) - Asian stock markets fell
sharply on Friday, spooked by a newspaper report that Wall
Street bank Merrill Lynch <MER.N> could be hit by $15 billion
in losses from soured mortgage investments. The dollar fell by
more than 1 yen, while gold hit a record high.
A New York Times report citing people familiar with the
situation that Merrill was trying to raise additional capital
from outside investors [] pressured the dollar, sent
share markets into reverse and lifted U.S. Treasuries.
Tokyo's main Nikkei stock index <> ended down 1.9
percent, its lowest close since November 2005, while South
Korea's KOSPI <> slid 2.3 percent to a seven-week closing
low. Australia's S&P/ASX 200 <> fell for a fifth straight
day.
"The report's making investors more nervous," said Kim
Sung-bong, analyst at Samsung Securities in Seoul. "U.S.
financial institutions start reporting fourth-quarter earnings
from next week, and markets are worried that subprime losses
will be bigger than expected."
But financial bookmakers predicted European stocks would
tick higher, with London's FTSE 100 <> seen up 9-13 points
and the German DAX <> unchanged to up 17 points.
MSCI's measure of Asia Pacific stock excluding Japan
<.MIAPJ0000PUS>, which touched a three-week low earlier this
week, was off 0.8 percent by 0700 GMT.
The index has dropped 3.3 percent so far this year as a
series of indicators signalled the U.S. economy may be headed
for a sharp slowdown, with some analysts predicting a
recession.
In Tokyo, shares in Seven & I <3382.T>, Japan's largest
retailer, slumped more than 6 percent as it cut its full-year
profit forecast. Its quarterly earnings slid 8.5 percent, hurt
by its U.S. convenience store business and a slow recovery in
consumer spending in Japan. []
GOLD HITS RECORD
Gold <XAU=> hit a record $898 an ounce on hopes of a
half-point U.S. interest rate cut later this month that would
increase the metal's appeal as an alternative investment.
Prices later eased back on profit-taking to around $891 by 0700
GMT.
Gold and other commodities have started the year around
record levels, with investment funds diversifying their
portfolio hedge against declining equity markets.
The dollar fell more than 1 yen on the renewed worries
about U.S. banks' losses from subprime mortgage-related
investments, hitting 108.63 yen <JPY=> on electronic trading
platform EBS.
Sterling fell 1.2 percent against the yen <GBPJPY=R>, and
hit a 10-month low of $1.9501 <GBP=D4>.
The dollar held near a five-week low against the euro
<EUR=> after comments from U.S. Federal Reserve Chairman Ben
Bernanke suggested an aggressive half-point cut in U.S. rates
was on the cards.
The yield on five-year Japanese government bonds hit a
two-year low as investors began to factor in the chance that
the Bank of Japan may cut interest rates this year.
The five-year yield <JP5YTN=JBTC> fell 5 basis points to
0.865 percent, its lowest since January 2006, while the
two-year yield <JP2YTN=JBTC> fell 5.5 basis points to 0.585
percent, also its lowest in two years.
U.S. crude oil prices <CLc1> rose 66 cents to $94.36 a
barrel in Asian trade, after dropping 2 percent to below $94
overnight amid concerns that a global economic slowdown could
dent energy demand.
(Editing by Ian Geoghegan)
