* Grim jobs data eclipse U.S. election euphoria
* Economic forecasts keep heading lower
* Yield curves steepen: Europe, Britain forecast to cut
rates
(Updates prices, adds Toyota, comments)
By Kevin Plumberg
HONG KONG, Nov 6 (Reuters) - Asian stocks dropped nearly 7
percent and commmodity-related currencies tumbled on Thursday
as more evidence 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 far-reaching consequences from such a
sharp slowdown in developed economies were still unfolding.
Wall Street institution Goldman Sachs Group Inc <GS.N>,
which had early in the financial crisis profited on bets
against the U.S. mortgage market, reportedly laid off 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 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 said in a note.
"At best, we have seen bear market rallies that were soon
overwhelmed by the reality of worsening economic conditions."
The MSCI index of Asia-Pacific stocks excluding Japan
<.MIAPJ0000PUS> fell 6.9 percent after hitting a 3-week
intraday high on Wednesday. The gauge has lost 53.5 percent so
far this year, exceeding the 40.7 percent decline on the
All-Country World index <.MIWD00000PUS>.
Japan's Nikkei share average <> slumped 5.4 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.
Toyota Motor <7203.T>, which is set to announce quarterly
results and forecasts after the close, skidded nearly 9 percent
after a newspaper said the automaker's annual operating profit
would more than halve from a year earlier due to slow sales.
Hong Kong's Hang Seng index <> tumbled 6.4 percent, led
by a 12.8 percent decline in Cathay Pacific <0293.HK> after the
airline warned about 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 investors bet the incoming Obama
administration will unlikely be able to act fast enough to
avert further economic damage.
OF POPPED CREDIT BUBBLES
The sheer size of the burst credit bubble has made
determining the economic implications difficult, and forecasts
for global economic growth continued to be revised lower.
Data on Wednesday showing a sharp deterioration in the U.S.
private sector jobs market and a contraction in the service
sector added to the gloom. []
Economists at Fitch Ratings this week lowered their
predictions to reflect the biggest decline in the combined
gross domestic product of Britain, the euro zone, Japan and the
United States since World War II.
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 to as low as $1.2842 <EUR=> on trading
platform EBS, down more than 1 cent from the day's high of
$1.2957.
The euro was down 0.9 percent against the yen at 125.75 yen
<EURJPY=R>, partly because a fall in Asian share prices fuelled
risk aversion and gave a boost to the yen.
"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, 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 down slightly, with the
December contract <CLc1> trading at $64.47, 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 Lincoln Feast)
