* BHP dropped bid for Rio reverberates, helps metal
producers
* Bank stocks react favourably to $800 bln Fed program
* Oil steadies at $51 after falling on global recession
fears
By Kevin Plumberg
HONG KONG, Nov 26 (Reuters) - Stocks in Japan and Australia
fell on Wednesday after a report showed the U.S. economy shrank
by the most since 2001, underscoring sharply slowing global
demand, while South Korean shares were boosted by steelmakers
after BHP Billiton killed its bid for Rio Tinto.
Wall Street stocks rallied after the Federal Reserve
unveiled an $800 billion effort to heal the U.S. mortgage
market and to aid consumer lending, with Washington racking up
a staggering $8.3 trillion bill to rescue companies and keep
the financial system from collapsing.
Oil prices <CLc1> were steady around $51 a barrel, after
dropping nearly 7 percent on Tuesday on fears a global
recession will weigh on demand, helping to support the U.S.
dollar.
With the year end approaching, a relief to markets battered
by the financial crisis, investors were content to make only
small adjustments to their portfolios given little evidence
that widespread risk taking for higher returns had made a
comeback.
"The market is concerned that with recessions in parts of
Asia, a recovery will take longer than in the U.S. We have just
seen things really slowdown here, so I think Asian markets have
more to fall," said Dariusz Kowalczyk, chief investment
strategist with CFC Seymour in Hong Kong.
Kowalczyk said his top trade for 2009 will be to buy U.S.
equities and sell longer-dated U.S. Treasuries, anticipating an
economic recovery later in 2009 and heavy new government debt
issuance to finance the myriad rescue packages and programs.
Japan's Nikkei share average <> slipped 1.3 percent,
weighed by a mix of major exporters such as Toyoto Motor Corp
<7203.T> and defensive names like Takeda Pharmaceutical Co Ltd
<4502.T>.
Australia's benchmark S&P/ASX 200 index edged down 0.8
percent, with Rio Tinto stock <RIO.AX> plummeting 32 percent.
The global miner's chairman said the company would not need
to raise equity and is confident it can sell assets to pay
debt, a day after rival BHP Billiton <BHP.AX> pulled its $66
billion offer for Rio, citing adverse market conditions.
[]
The MSCI index of Asia-Pacific stocks excluding Japan
<.MIAPJ0000PUS> was up 1 percent, extending gains made in the
past three sessions.
Hong Kong's Hang Seng index <> was up about 2.5
percent, helped by metal producer Chalco's <2600.HK> 7.5
percent jump as the crumbled BHP and Rio deal was seen opening
opportunities in other firms.
M&A SHOCKWAVES
Zig-zagging share prices, frozen lending between banks and
a seismic shift in Wall Street's structure has sent shockwaves
through many merger and acquisition deals.
So far in the fourth quarter alone, withdrawn M&A deals
total $322 billion, nearly matching the value of those
completed, according to Thomson Reuters data.
The U.S. dollar inched up against the euro as market
players remained sceptical that the latest U.S. measures to
boost consumer lending would ease concerns about the financial
crisis.
Worries over the global economic downturn and credit
jitters have kept investors wary of taking risks, limiting
selling of the dollar and yen, traders said.
"There have been so many steps taken by the U.S.
authorities, leaving the impression they are doing anything in
their capacity, but not necessarily with consistency," said
Mitsuru Sahara, a senior manager at Bank of Tokyo-Mitsubishi
UFJ.
"The market reaction has become increasingly cool, as it
has become accustomed to new measures coming one after the
other without feeling that the market has hit a bottom," he
said.
The euro eased 0.4 percent to $1.3013 <EUR=>, after hitting
a three-week high of $1.3081 overnight on trading platform EBS.
The euro eased 0.8 percent against the Japanese currency to
123.41 yen <EURJPY=R> as Japanese stocks fell.
The U.S. light crude future for January ticked up 43 cents
to $51.20 a barrel, recovering a bit after Tuesday's steep
selloff.
Still, since July when oil hit an all-time high of $147.27
a barrel, crude has been in freefall, raising concerns among
oil-producing nations as recessions in major consumers saps
energy demand.
OPEC ministers next gather in Cairo on Saturday, but that
meeting has been called a consultative session, with its next
policy-setting meeting scheduled for Dec. 17 in Algeria.
(Additional reporting by Chikako Mogi in TOKYO; Editing by
Dhara Ranasinghe)
