* Global earnings expectations are questioned
* MSCI world stocks index hits 23-month low
* U.S. dollar, metals both edge up
By Kevin Plumberg
HONG KONG, Aug 20 (Reuters) - Asian stocks fell to a
two-year low on Wednesday, down 30 percent from a peak hit in
November, as the past month's $30 drop in the price of oil has
not been enough to shake a sense of fear about sharply slowing
global growth.
World stock markets slid to the lowest since September 2006
on Tuesday, with investors increasingly sceptical about
earnings expectations for 2009 given the mixed results so far
in 2008 and the constant reminders about instability in the
financial sector.
Crude crept up near $115 a barrel and gold prices edged
higher, but the U.S. dollar continued to rise and extend the
last two weeks of sharp gains. U.S. gasoline inventory data due
later in the day is expected to show a fourth consecutive
weekly loss.
"U.S. financial worries are responsible for about 80
percent of the market fall here today," said Masayoshi Okamoto,
head of dealing at Jujiya Securities in Tokyo. "The rest is due
to the eroding outlook for corporate earnings for the first
half."
Japan's Nikkei share average <> fell 0.3 percent to a
one-month low on apprehension about the earnings outlook after
the Bank of Japan described the world's second-largest economy
as "sluggish" -- a term it has not used since the Asian
financial crisis a decade ago.
The MSCI pan-Asia equities index <.MIAS00000PUS> fell 0.5
percent to its lowest since July 2006, down 22 percent this
year.
The MSCI all-countries world index <.MIWD00000PUS> on
Tuesday tumbled to a 23-month low, down 18 percent
year-to-date.
Hong Kong's Hang Seng index <> slipped 0.4 percent,
after closing at a one-year low on Tuesday, with shares of HSBC
<0005.HK> the biggest drag.
The Shanghai composite index <> fell 0.8 percent, in
sight of a 20-month low reached on Tuesday. The index is
watched by many global investors as a gauge of risk taking and
a leading indicator for the world's fastest growing economy.
Donald Straszheim, vice chairman of Roth Capital Partners
in Los Angeles and a long-time China analyst, said the worst
performing stock market this year will continue to fall because
of the toxic concoction of slowing growth and high inflation.
He expects earnings to rise 15 percent in China this year,
down quite sharply from 30 percent to 45 percent pace enjoyed
by most sectors in 2006 and 2007.
"Shanghai has proven to be a very emotional market, and is
likely to stay that way," said Straszheim in a note to clients.
FED IS "POISED TO ACT"
Some economists believe that all of the Group of Seven rich
nations are at risk of recession, with Europe, Japan and the
United States perhaps already in one. Such widespread economic
weakness would hurt emerging markets that depend on demand from
advanced economies.
Central bank officials have been struggling to balance
concerns about rapidly slowing growth rates around the world
with persistent inflation.
Two Federal Reserve officials known for their tough stances
against price pressures stressed overnight the central bank has
to be prepared to raise interest rates to keep inflation at bay
if slowing growth does not do the trick. []
"Until we have a clear sense of what will prevail, monetary
policy-makers must remain poised to act if slowing growth fails
to contain inflationary pressures," said Richard Fisher,
president of the Dallas Fed.
Higher borrowing costs might be the last thing that
corporate management wants at a time when consumer demand is
drying up.
After weeks of liquidation of positions in the metals
markets, which have helped to push up the U.S. dollar,
investors slowed down to survey the scene.
The euro edged down 0.1 percent to $1.4767 <EUR=>, but was
up from a six-month low around $1.4630 hit on Tuesday.
The dollar rose 0.2 percent to 109.82 yen <JPY=>,
struggling to test a seven-month high of 110.67 yen reached
last week.
Metals markets were relatively quiet compared with the last
few days. Gold rose 0.4 percent in the spot market to $816.30
an ounce <XAU=>, spending only a few days trading below $800.
The September U.S. light crude contract <CLc1> rose 37
cents to $114.90 a barrel, gravitating around the $115 mark.
Oil is still up 20 percent so far this year but its sharp
decline in the last month on expectations for slowing demand
has stung a variety of investors from institutions to hedge
funds.
