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By Kevin Plumberg
HONG KONG, May 28 (Reuters) - Asian stocks slipped on
Wednesday, as a cloudy U.S. economic outlook and lingering
inflation fears left investors skittish, despite a drop in oil
prices below $129 a barrel, .
A rally in the U.S. dollar capped crude for now, although
oil's 34 percent climb so far this year has raised fears about
tighter consumer spending and business investment in the
world's largest economy.
Government bond markets continued to show signs of weakness
as investors unloaded positions built up during the height of
the credit crisis and price in rising inflation. The benchmark
yield on the 10-year U.S. Treasury note jumped about 7 basis
points overnight after a reading of U.S. consumer inflation
expectations surged.
"While oil prices have eased somewhat, they still remain
high, and volatility in the foreign currency market is
contributing to investors' uncertainty about the macroeconomic
environment," said Lee Kyoung-su, a stock market analyst at
Daewoo Securities.
"We saw a technical rebound yesterday after a week of
losses, and it appears that gains will stop here for now," said
Lee.
Japan's Nikkei share average <> fell 0.2 percent and
is down 9.6 percent this year but has remained in a narrow
trading range throughout May.
An MSCI index of stocks in the Asia Pacific region outside
of Japan <.MIAPJ0000PUS> fell 0.4 percent, dragged down by the
Australian stock market <>, which sank 1 percent on losses
at resource-related companies.
Korea's KOSPI index <> slipped 0.2 percent, weighed
down the most by automaker Hyundai Motor Co <005380.KS>
although gains technology companies such as Samsung Electronics
<005930.KS> and LG Electronics <066570.KS> prevented deeper
losses.
The U.S. dollar was mostly steady against major currencies.
The New York Board of Trade's U.S. dollar index was up slightly
at 72.357 <.DXY>.
Repeated attempts to push the index below 70.0 in the last
couple of months have come up empty, keeping oil prices from
retesting record highs just above $135 a barrel.
The July contract for U.S. light crude <CLc1> settled at
$128.25 on Tuesday, down around $4 on the day.
The euro was at $1.5685 <EUR=>, flat on the day. Against
the yen, the dollar dipped 0.2 percent to 104.05 yen <JPY=>.
Japanese government bond prices edged up but the overall
trend of higher yields remained. Amid thin volume, investors
picked over the remains of a selloff that has sent the
benchmark 10-year yield 40 basis points higher in the last
three months.
June 10-year futures <2JGBv1> fell as low as 133.99, just
above a nine-month trough of 133.93 hit on Friday, before
rising 0.14 to 134.49.
The benchmark 10-year yield <JP10YTN=JBTC> eased 1 basis
point to 1.750 percent, after rising as high as 1.785 percent
to match its highest level since Aug. 9 hit on Tuesday.
"The JGB market took a cue from Treasuries, which fell
despite a drop in oil prices. JGB market players are now
testing to see if the 10-year yield will hit 1.8 percent," said
Naomi Hasegawa, senior JGB strategist at Mitsubishi UFJ
Securities.
Gold prices were steady after a 2 percent tumble on
Tuesday. In the spot market, gold was at $907.30 <XAU=> an
ounce after finishing at $904.80 the previous day.
(Editing by Lincoln Feast)
