* U.S. earnings shortfalls bode ill for Asia's corporates
* Dollar hits 20-month high vs euro; sterling at 5-year low
* Asia facing in inventory problem?
(Repeats to more subscribers)
By Kevin Plumberg
HONG KONG, Oct 22 (Reuters) - Asian stocks fell on
Wednesday as poor U.S. corporate results and falling commodity
prices fanned worries of a protracted global economic slowdown.
The U.S. dollar rose to a 20-month high against the euro as
investors bet that central banks around the world will have to
catch up to this year's deep interest rate cuts by the Federal
Reserve as their economies slow.
In addition to problems created by tight credit markets,
some Asian companies have been caught off guard by the pace at
which global demand has dropped. As a result, rising
inventories pose yet another drag on earnings prospects.
"As the credit crunch has worsened, wholesale business
inventories have risen, causing an alarming rise in inventories
in Asia and emerging markets at a time when seasonally these
are usually being drawn down," said Sean Darby, chief Asia
strategist with Nomura in Hong Kong.
"We would expect earnings to be further revised down within
Asia and global emerging markets," he said in a note.
Japan's Nikkei share average <> fell 2.85 percent,
erasing Tuesday's gains.
Mitsubishi UFJ Financial Group's <8306.T> shares dropped
6.2 percent after the Nikkei business daily said Japan's top
lender will sharply cut its net profit estimate for the half
year ended Sept. 30, with the final figure expected to be half
that of a year earlier.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> declined 2.2 percent. The 51.5 percent fall in
the index year-to-date has outpaced the 41.1 percent drop in
the all-country world index <.MIWD00000PUS>.
Hong Kong's Hang Seng index <> was largely unchanged,
helped by investors snapping up oversold shares of companies
such as fashion retailer Esprit Holdings <0330.HK>.
Shares of the largest listed Chinese power provider Huaneng
Power International <0902.HK> dropped 5 percent after it posted
a quarterly loss on difficulties coping with soaring coal
prices.
Overnight, U.S. stocks fell on an array of disappointing
corporate results from companies such as industrial machine
maker Caterpillar Inc <CAT.N> and the largest publicly traded
copper producer Freeport-McMoRan Copper & Gold Inc <FCX.N>. The
Standard & Poor's 500 index <.SPX> dropped 3.1 percent.
The most dominant market trend since the financial crisis
began, particularly in the last month, has been a broad process
called de-leveraging, by which investors cut down on their
debt-financed positions and sell liquid assets for cash or to
pay off losing strategies.
Of the many markets affected by this process, the equity
and commodity markets have been hard hit.
U.S. crude for December delivery <CLc1> fell $1.13 to
$71.05 a barrel. The contract hit a 16-month low last Thursday
and is down 26 percent so far this year, with investors
expecting demand from big consumers like China and the United
States to continue to wane.
OPEC will meet on Friday and analysts widely expect an
output cut to boost prices. The size of such a cut is highly
controversial and has far-reaching consequences with the global
economy facing a potential recession.
The steep downward trend in raw materials prices, almost
all of which are priced in U.S. dollars, has supported the
currency's strength.
The euro fell 0.3 percent to $1.3023 <EUR=> after dropping
as low as $1.3002, a fresh 20-month low, on trading platform
EBS.
"The euro is being hit by concerns that the euro zone
economy will receive an impact from deteriorating economic
conditions in the surrounding emerging markets," said Shuichi
Kanehira, a senior trader at Mizuho Corporate Bank in Tokyo.
Sterling was down 0.8 percent at $1.6570 <GBP=D4> after
falling as low as $1.6510, its lowest since September 2003.
Bank of England Governor Mervyn King said on Tuesday that
Britain's economy is probably entering its first recession in
16 years. []
Policymakers were still battling to bring down short-term
funding costs and support money markets. The Federal Reserve
began a program to lend up to $540 billion to five entities
that will buy certificates of deposit and commercial paper from
money market mutual funds. []
The efforts, especially plans to directly recapitalise the
banking industries in Europe and the United States, have shown
some success.
Three-month London interbank offered rates, an
international lending benchmark, were at 3.83 percent, down
from 4.06 on Tuesday but still a full percentage point above
where it was at the beginning of September.
(Editing by Kim Coghill)
