(Updates prices, adds comments, European outlook)
By Kevin Plumberg
HONG KONG, May 28 (Reuters) - Asian stocks slid on
Wednesday, down for the sixth day out of seven, as a cloudy
U.S. economic outlook and lingering inflation fears left
investors skittish, despite a dip in oil prices below $129 a
barrel.
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, particularly with the U.S. dollar
showing no signs of consistent strength.
European equity investors were more positive, with
financial bookmakers forecasting modest opening gains for major
markets in London <>, Frankfurt <> and Paris
<>. []
Government bond markets continued to show signs of weakness
as investors unload 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 1.3 percent and
is down 10.4 percent this year.
An MSCI index of stocks in the Asia Pacific region outside
of Japan <.MIAPJ0000PUS> fell 0.7 percent, dragged down by the
Australian stock market <>, which sank 1.3 percent on
losses at resource-related companies.
China's third-largest oil and gas producer CNOOC Ltd
<0883.HK> fell 4.8 percent, helping to drag Hong Kong's Hang
Seng index <> down by 0.3 percent at the midday break.
Korea's KOSPI index <> fell 1.1 percent, weighed down
by automaker Hyundai Motor Co <005380.KS>.
Taiwan stocks <> ended 1.3 percent lower on inflation
worries, although top semiconductor foundry TSMC <2330.TW>
gained 1.8 perent after it said it may raise prices on high-end
chips.
After a month of solid gains in April, global equity
markets have languished in May, as investors deal with the
implications of credit markets that continue a slow process of
healing, sluggishness in housing, and a persistent rise in
commodity prices.
Meanwhile, policymakers have been forced to refocus their
efforts on dealing with the spike in prices of everything from
grains and pigs to oil and gasoline.
DOLLAR SLIPS, BONDS STILL VULNERABLE
San Francisco Federal Reserve President Janet Yellen said
on Tuesday the U.S. central bank will not allow inflation to
spiral out of control, echoing the sentiment of European
Central Bank Governing Council member Axel Weber, who said in a
Reuters interview that euro zone rate cut expectations for this
year was "wishful thinking." For more click on []
and [].
Taiwan said on Tuesday it will raise fuel prices, following
India, Indonesia, Malaysia and others markets in Asia that have
decided to cut increasingly expensive subsidies.
"The gradual unwinding of energy subsidies in various net
energy importing emerging market economies will ultimately
prove to be negative for their assets," said Stephen Jen,
global head of currency research with Morgan Stanley in London.
"The cyclical sweet spot for most emerging market assets
and currencies is, in my view, behind us," he said in a note.
The U.S. dollar dipped against major currencies after
rallying on Tuesday. The New York Board of Trade's U.S. dollar
index was down 0.11 percent at 72.309 <.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> was nearly
unchanged at $128.84.
The euro was at $1.5715 <EUR=>, up 0.21 percent 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.
The benchmark 10-year yield <JP10YTN=JBTC> eased 3 basis
points to 1.730 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 $907.35 <XAU=> an
ounce after finishing at $904.80 the previous day.
(Editing by Lincoln Feast)
