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* Focus shifts to earnings outlook amid global slowdown
* Risk takes back seat as yen, Treasuries rise
* U.S. appears in recession - Fed's Yellen
By Kevin Plumberg
HONG KONG, Oct 15 (Reuters) - Asian stocks fell and gold
rose on Wednesday on investor worries of lower corporate
earnings in a weakening global economy, even as money markets
continued to heal gradually.
Oil prices were not far from a 12-month low hit on Friday
while the yen and U.S. Treasuries climbed, reflecting fears the
damage that the financial crisis inflicted on the global
economy is still working its way through the system.
Quarterly reports have begun to trickle in, with JPMorgan
Chase & Co <JPM.N> and Merrill Lynch <MER.N> set to post their
results this week. Investors will be focused on the outlook and
whether most expectations for a rebound in 2009 will have to be
reined in.
"While the financial system crisis appears to be heading in
a positive direction, the economy appears to be increasingly
bad, and this is raising worries about company earnings. We
still don't know how much these might be hit," said Hiroaki
Osakabe, a fund manager at Chibagin Asset Management.
Japan's Nikkei share average <> fell 1.4 percent in
early trade after rising 14.2 percent on Tuesday, its largest
single-day gain ever. Automaker shares were the biggest drag on
the index, with Honda Motor Co <7267.T> stock down 5.6 percent
and Toyota Motor Corp <7203.T> 4.8 percent lower.
The MSCI index of Asia-Pacific stocks outside of Japan
<.MIAPJ0000PUS> fell 2.7 percent and is down 12 percent so far
in October.
Hong Kong's Hang Seng index <> slipped 2.4 percent,
snapping a two-day 14 percent rally.
This week the biggest and most direct effort yet by
policymakers around the world to thaw short-term lending
markets has had some success, particularly in slowing plunging
global equity markets. Money market pressures were easing
slowly and the risk of a system-wide failure has passed for
now.
Governments around the world have ushered in a new,
uncertain era in banking, having pledged about $3.2 trillion to
among other things guarantee bank deposits, back interbank
borrowing and recapitalise financial institutions.
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However, the U.S., euro zone and Japanese economies are all
widely expected to slip into recessions, threatening growth in
emerging markets.
"As a result of the growing economic/earnings pessimism
risk trades could come back to the fore more quickly than many
anticipate," strategists with Calyon in Hong Kong said in a
note.
"The U.S. dollar may not benefit as much as it has done
over recent weeks as it appears that the bulk of
deleveraging-related repatriation flows have been undertaken,
as well as the fact that market pessimism is once again being
directed towards the U.S."
The yen rose broadly on renewed unwillingness among
investors to take risks and coinciding with a fall in U.S.
stock futures <SPc1>.
The euro lost 0.7 percent against the yen to 138.12
<EURJPY=R> and dropped 0.4 percent against the dollar to
$1.3560 <EUR=>. The U.S. dollar fell 0.5 percent from late New
York trade to 101.57 yen <JPY=>.
Japanese government bonds were mixed, with short-term
yields falling as investors took heart from the Bank of Japan's
emergency meeting to restore liquidity to the strained yen
money market.
The two-year yield <JP2YTN=JBTC>, which moves in the
opposite direction of the price, was down 3.5 basis points at
0.805 percent. The benchmark 10-year yield <JP10YTN=JBTC> was
flat at 1.575 percent, holding below a three-month peak of
1.630 percent reached the previous day.
U.S. Treasury debt prices recovered after falling sharply
on Tuesday on worries about increased government borrowing
needs as a result of bank rescue packages.
The benchmark 10-year yield <US10YT=RR> slid to 4.04
percent after hitting a three-month high of 4.09 percent on
Tuesday.
San Francisco Federal Reserve President Janet Yellen warned
in a speech the U.S. economy appeared to be in a recession and
that job creation could struggle for months or even years. The
futures market reflects a 92 percent chance the Fed will reduce
interest rates to 1.25 percent from 1.5 percent this month.
U.S. crude oil futures <CLc1> were down 0.7 percent to
$78.10 a barrel after a 3 percent decline overnight on
expectations for slowing demand.
Gold rose 0.8 percent <XAU=> in the spot market to $842 an
ounce and is up 7.1 percent from a month ago.
(For more on the crisis, click [])
(Additional reporting by Elaine Lies in TOKYO; Editing by Jean
Yoon and Sanjeev Miglani)
