* Asia stocks fall after oil spikes $5 overnight
* Financial sector hurt by report Lehman needs more capital
* U.S. dollar rises on confidence in the Federal Reserve
(Repeats to more subscribers, updates prices, adds comments)
By Kevin Plumberg
HONG KONG, June 12 (Reuters) - Asian stocks fell to
two-month lows on Thursday after oil prices jumped on a report
showing tightening supply, adding to fears about rising
inflation and higher interest rates around the world.
Financial companies, such as Sumitomo Mitsui Financial
Group <8136.T> and National Australia Bank <NAB.AX>, were under
fire after a report that U.S. investment bank Lehman Brothers
<LEH.N> may hunt for more capital after already raising $6
billion, raising questions about the company's management.
[]
Meanwhile, oil's unrelenting climb has made investors
nervous about higher borrowing costs, especially after Federal
Reserve Chairman Ben Bernanke earlier this week said the recent
rise in oil has increased the chances that inflation pressures
will grow.
"Inflation worries are heightening the possibility that
central banks, including those of South Korea and the United
States, will raise key interest rates in the near future," said
Y.S. Rhoo, a market analyst at Hyundai Securities.
Japan's Nikkei share average fell 2 percent to the lowest
level in two weeks. Exporters with high-profile brands overseas
were some of the heaviest hit, such as Canon Inc <7751.T> and
Sony Corp <6758.T>.
The MSCI index of pan-Asian stocks <.MIAS00000PUS> dropped
2.3 percent to the lowest since April 2, while a separate index
of Asia-Pacific equities excluding Japan <.MIAPJ0000PUS> was
off 2.4 percent to the lowest since March 25.
Korea's KOSPI declined 1.3 percent <>, led by POSCO Co
Ltd <005490.KS>, the world's fourth largest steelmaker.
The Bank of Korea was the latest central bank to warn about
widening inflation pressures, though it kept its benchmark
interest rate unchanged after a meeting.
Several central banks in the region, including those in
China, India, Indonesia and the Philippines, have already begun
to tighten monetary policy to fight upward pressure on prices.
And companies and governments in Asia continue to
cautiously pass on higher costs to consumers.
China's Shandong province, a major steel-making area, has
raised power tariffs for industrial users during peak hours as
it faces a possible power shortage, offering a boost to
utilities squeezed by surging coal prices. []
Higher energy and food prices have sparked double-digit
inflation rates in some Asian countries and increasingly have
pointed to a bear market for equity markets in the region.
ASIAN BEARS
From a record high on Nov. 1, the MSCI Asia ex-Japan index
is now down around 24 percent. The popular definition of a bear
market is one characterised by a prolonged period of falling
prices, usually by 20 percent or more.
In the last six months, global investors have reduced their
exposure to the region, which was only a year ago hailed for
its high returns and low inflation.
Data from The Bank of New York Mellon, one of the biggest
custodians of foreign assets in the world, showed that since
January, flows of capital out of the Philippines and Hong Kong
were among the largest in the world.
U.S. light crude prices <CLc1> fell 95 cents to $135.43
after rising around $5 overnight on a report showing U.S.
stockpiles fell for the fourth straight week. Crude hit an
all-time high above $139 hit last week.
Oil prices have risen nearly seven-fold since 2002, partly
because of rising demand from China and other rapidly
developing countries, pressuring major consumer the United
States, which is already hobbled by a housing slowdown and
credit crunch.
Representatives of the world's biggest oil consumer and
producer nations will meet in Saudi Arabia on June 22 to
discuss the oil spike, which producer group OPEC says is due to
speculation, not a lack of supply. []
The U.S. dollar rose against the euro and yen, continuing
to rally on investor confidence the Fed will be able to balance
growth with mounting inflation pressures.
The dollar has been strengthening the most against Asian
currencies as the view takes hold that central bankers in the
region are behind the curve in battling inflation, spurring
expectations for higher interest rates.
"Pledges to tackle actual or threatened inflation with
tighter monetary policy can be a moderate currency support, but
only in so far as investors have confidence in the message from
policymakers and inflation is not undermining asset prices,"
said Patrick Bennett, Asia foreign exchange and interest rates
strategist with Societe Generale in Hong Kong.
"For the global economy right now there is greater fear of
the latter," he said in a note.
The euro tumbled 0.5 percent to $1.5477 <EUR=> and has
remained in a range of $1.60 to $1.53 ever since mid March.
Against the yen, the dollar rose 0.4 percent to 107.27 yen
<JPY=> and is up 12 percent in the last three months.
The dollar climbed to the highest since late February
against the yen on Wednesday, bolstered Bernanke's stronger
comments about containing inflation.
Bernanke warned markets the Fed will not be complacent as
declines in the dollar helped to spur crude's 40 percent climb
so far this year.
(Additional reporting by Park Jung-youn in SEOUL)
(Editing by Kim Coghill)
