* Familiar inflation fears nag investors
* Infosys, POSCO, General Electric reporting results
* Commodity prices high but some see retreat coming
By Kevin Plumberg
HONG KONG, July 11 (Reuters) - Asian stocks slipped on
Friday after oil prices climbed back above $141, a nagging
reminder of rising inflation pressures, while the U.S. dollar
struggled on fears about potentially underfunded mortgage
finance companies.
The onslaught of higher commodity prices, the main culprit
cited as a reason for high global inflation, showed no sign of
letting up soon.
Crude was holding at $141.72 a barrel after jumping
overnight on threats to production in Nigeria and Brazil, and
aluminium prices hit a record on output cuts in China, keeping
high expectations for higher costs and lower spending.
"What needs to happen is for oil prices to fall to low
levels and be sustained there for some time but it just doesn't
seem likely that that's going to happen," said David Spry,
research manager at F.W. Holst in Sydney.
"I'm not in the corner that thinks this is going to be a
quick recovery.
Japan's Nikkei share average <> was down 0.3 percent,
with high-profile exporters such as Canon Inc <7751.T> and
Toyota Motor Corp <7203.T> among the biggest weights on the
index.
Outside of Japan, shares in the Asia-Pacific region
<.MIAPJ0000PUS> were largely unchanged on the day and on the
week, having fallen for the past seven weeks running.
Mainland China shares on the Shanghai Composite Index were
down 0.6 percent <>.
Australia's benchmark index <> was flat, with strength
in energy-related shares offset by declines in the financial
sector.
Focus will be on the world's fourth-largest steel maker
POSCO <005490.KS>, Indian tech-sector bellwether Infosys
Technologies <INFY.BO> and industrial giant General Electric
<GE.N>, which will all be reporting results later.
Disappointing quarterly earnings or dour forward-looking
comments from companies could unleash downward revisions to
profit expectations for 2008 and 2009, analysts said. Margins
have been practically assaulted by higher costs associated with
commodity prices and slackening consumer spending, particularly
in developed economies.
SLOW GROWTH, HIGH COMMODITY PRICES DON'T MIX
However, as prices for raw materials such as oil continue
to climb, more investors are confident that a sharp turn lower
based on reduced demands is likely nearing .
The rate at which institutional investors are sending
equity capital to heavy commodity exporting nations such as
Chile and South Africa has been falling fast, according to data
from State Street Global Markets. And the correlation between
cross-border equity flows into exporting nations and market
performance likely peaked at 40 percent in April, the bank
said.
"The macro backdrop also makes falling commodity prices
more likely. Slowing growth and booming commodity markets are
not generally compatible," State Street analysts said in a
note.
The U.S. dollar was steady against major currencies after
falling the previous day on deepening concern about the fate of
top U.S. mortgage finance companies Fannie Mae <FNM.N> and
Freddie Mac <FRE.N>, whose stocks and bonds have been hit hard
this week on worries about under capitalisation.
The euro <EUR=> was at $1.5783, while the dollar was
trading at 107.02 yen <JPY=>.
Japanese government bond futures rose slightly, near a
two-month high as worries remained about the health of the
financial sector and the economy, and investors continued to
shift funds to the safe-haven debt.
"The scope for long-dated JGB yields to rise is very
limited as worries about the U.S. financial sector simmer, and
when the outlook for stock prices is highly uncertain," said
Jun Ishii, chief fixed-income strategist at Mitsubishi UFJ
Securities, in a note to clients.
September futures <2JGBv1> rose 0.12 point to 136.22,
staying near 136.40 hit the previous day, the highest since May
13.
(Additional reporting by Geraldine Chua in SYDNEY and Satomi
Noguchi in TOKYO; Editing by Lincoln Feast)
