By Rafael Nam
HONG KONG, June 23 (Reuters) - Asian stocks tumbled to
multi-month lows on Monday amid fears that more bad news could
be lurking in the global financial sector, but oil prices held
steady above $135 a barrel after Saudi Arabia said it was ready
to increase output.
Inflation remains a major concern. World energy powers met
for an emergency session at the weekend in Jeddah, Saudi
Arabia, but had no quick fix to crude prices that have doubled
over the past year. []
The prevailing uncertainty kept the dollar range-bound, but
lifted most Asian bonds. Investors were also on hold for the
U.S. Federal Reserve's policy setting meeting that begins on
Tuesday and could give further clues as to U.S. interest rates.
"There are worries about additional mortgage-related losses
at U.S. financial institutions," said Kenichi Hirano, operating
officer at Tachibana Securities in Tokyo.
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> fell more than 1 percent, hitting its lowest
since March 25. The index has fallen for five straight weeks
and is down more than 17 percent this year.
The losses follow a weak session in Wall Street on Friday
as expectations that U.S. financial firms will need to raise
more capital triggered a guessing game about who will be next.
Global lenders remain under pressure, with Citigroup <C.N>,
the largest U.S. bank, set to slash 6,500 jobs in its
investment bank division, according to the Wall Street Journal.
[]
The financial crisis has set into motion more U.S.
regulatory scrutiny. According to another Wall Street Journal
article, the Fed and the U.S. Securities Exchange Commission
are finalising an agreement to start the process of redrawing
how Wall Street is regulated. []
A global financial sector struggling to come to grips with
the effects of a credit crunch has been accompanied by the
spectre of rising inflation as food and energy costs surge.
Tokyo's Nikkei average <> dropped 1.3 percent, led
down by blue-chip exporters such as Canon Inc <7751.T> and
financial firms such as Mitsubishi UFJ Financial Group
<8306.T>.
South Korean shares <> also fell 1.3 percent, hitting
at one point their lowest level in 12 weeks, while stocks in
Taiwan <> touched a four-month low.
Shares in Australia <>, Singapore <.FTSTI> and
Shanghai <> were down more than 1 percent.
STEADY OIL
U.S. crude futures <CLc1> edged up 30 cents to $135.66 a
barrel as tensions between Israel and Iran and a weak dollar
continue to bolster prices that gained nearly $3 on Friday.
But Saudi Arabia's willingness to increase oil output and a
ceasefire announced by Nigerian militants contributing to cap
broader gains.
"The market has taken profits on comments by Saudi Arabia
it will raise production ... but there are many other factors
at play, which has in some ways offset the news from Jeddah,"
said Mark Pervan, a senior commodities analyst at Australia and
New Zealand Bank in Melbourne.
Meanwhile, the dollar was little changed from late U.S.
trading on Friday at 107.31 yen <JPY=>, or well below a 4-month
high of 108.59 yen hit last week.
The euro edged up 0.1 percent to $1.5624 <EUR=>, supported
by expectations that the European Central Bank will raise
interest rates by a quarter percentage point to 4.25 percent in
July.
On the other hand, U.S. interest rates are widely expected
to be kept steady at 2 percent this week, though investors will
focus primarily on the central bank's statement.
Most Asian bonds gained as investors sought safety from the
stock losses, but an exception was South Korea, where
government debt tumbled on a newspaper report the Bank of Korea
was planning to raise reserve requirements to curb hefty money
supply growth, though the central bank denied this.
[]
South Korean September treasury bond futures <KTBc1> fell
as much as 36 ticks to 105.58.
Gold <XAU=> rose about $3 an ounce to above $904.
