* Grim jobs data eclipse U.S. election euphoria
* Fear gauge jumps 14 pct as more economic damage seen
* Yield curves steepen: Europe, Britain forecast to cut
rates
By Kevin Plumberg
HONG KONG, Nov 6 (Reuters) - Asian stocks fell sharply and
the yen rose on Thursday as more evidence that the U.S. economy
is shrinking made investors brace for a potentially deep and
lasting global recession.
After toying for several days with raising their threshold
for risk by buying beaten-down shares, investors were
overwhelmed by fears that a sharp slowdown in developed
economies will have far-reaching consequences for the rest of
the world.
Wall Street investment bank Goldman Sachs Group Inc <GS.N>,
a firm that had early in the financial crisis profited on bets
against the U.S. mortgage market, reportedly cut 3,200
employees this week, and the Bank of England and the European
Central Bank were expected to cut interest rates aggressively
to shore up their economies. []
A growing group of economists even think the Bank of
England later on Thursday could lop off a full percentage point
from borrowing costs in answer to critics who said the central
bank had not done enough to save Britain from the pain of the
worst financial shock in a generation.
"Supportive policies, valuations and positions are not
enough to bring about a sustained rebound in riskier markets,
as has been clear over the past year," said Jan Loeys, head of
global asset allocation with JPMorgan in London.
"At best, we have seen bear market rallies that were soon
overwhelmed by the reality of worsening economic conditions,"
he said in a note.
The MSCI index of Asia-Pacific stocks excluding Japan
<.MIAPJ0000PUS> fell 6.3 percent after hitting a 3-week
intraday high on Wednesday. The gauge has lost 53 percent so
far this year, exceeding the 40.5 percent decline on the
all-country world index <.MIWD00000PUS>.
Japan's Nikkei share average <> slumped 5.7 percent,
led by high-profile exporters like Canon Inc <7751.T> and Honda
Motor Co <7267.T> that are expected to be affected the most by
a steep drop in overseas demand as consumers cut back spending.
South Korea's benchmark KOSPI <> was down 6.2 percent,
snapping a five-day winning streak. Consumer gadget maker
Samsung Electronics <005930.KS> and the world's fourth-largest
steel producer POSCO <005490.KS> were the biggest drags on the
index.
Hong Kong's Hang Seng index <> tumbled 6.1 percent, led
by a 11.8 percent decline in Cathay Pacific stock <0293.HK>
after the airline warned of fuel hedging losses of $360 million
which would hurt 2008 results.
Major U.S. stock indexes posted losses overnight of more
than 5 percent, as the ebullience surrounding Barack Obama's
landslide U.S. presidential election victory faded and the cold
reality set in that a new administration will unlikely be able
to act fast enough to avert further economic damage.
MALAISE DEEPENS
The Chicago Board Options Exchange volatility index <.VIX>,
a widely watched measure of investor fear, jumped 14.3 percent
on Wednesday, shattering a steep downward trendline that
stretched down from Oct. 27.
The euro and sterling fell against the dollar, ahead of
expected rate cuts in Britain and Europe, while the yen firmed
against higher-yielding currencies as fear-based trades ruled.
The euro fell 0.4 percent from late U.S. trade to $1.2905
<EUR=>. The European single currency dipped 0.4 percent versus
the yen to 126.37 yen <EURJPY=R>.
Sterling slid 0.4 percent to $1.5840 <GBP=D4>.
The U.S. dollar was little changed at 97.91 yen <JPY=>.
"We remain of the view that conditions in the real economy
will weaken further, and that external demand prospects for the
euro zone economy are not bright," Brian Kim, currency
strategist with UBS in Stamford, Connecticut, said in a note.
Japanese government bonds climbed as equities dropped.
The 10-year JGB future rose around 0.8 point to 138.00,
having rebounded heartily from 3-month lows touched late last
month.
Steepening yield curves, in which the difference increases
of long-dated yields over short-dated ones, were still the
trend in government bond markets, especially in Britain
<GBBMK=> and the euro zone <EUBMK=>. Investors expect that
central bankers in those areas will have to catch up with the
rate cuts in the United States.
Since the bankruptcy of Lehman Brothers in mid September,
the euro zone 2-year to 10-year spread has widened by 100 basis
points, UK by 147 basis points and U.S. by 74 basis points.
Most of the steepening was because of short-end yields tumbling
as investors priced in rate cuts.
U.S. crude oil futures were largely unchanged, with the
December contract trading at $65.15, after falling 7 percent on
Wednesday when a U.S. government report showed gasoline
inventories growing as demand in the world's top consumer
slowed further.
(Editing by Kim Coghill)
