* Three-month low on Wall Street washes over into Asia
* U.S. dollar down for fourth day, worrying exporters
* Food inflation may rise as U.S. corn prices surge
(Repeats to additional subscribers with no change to text)
By Kevin Plumberg
HONG KONG, June 19 (Reuters) - Asian stocks slid on
Thursday, after Wall Street closed at a three-month low,
sparking fears of a pullback in export demand with oil prices
remaining high and feeding a rally in safe-haven government
bond prices.
The U.S. dollar was down for a fourth straight day against
major currencies as expectations for higher interest rates from
the Federal Reserve continue to be doused by evidence the U.S.
economy may not have hit bottom yet.
Japan's Nikkei share average <> tumbled 2 percent in
early trade, leading the region lower and bringing the year's
losses to 7.5 percent. Car makers such as Honda Motor Co
<7267.T> and Toyota Motor Corp <7203.T>, which are sensitive to
fluctuations in fuel prices, were among the biggest weights on
the index.
"Exports support Japan's economy and there's no way Japan
won't be affected. Shanghai and Vietnamese stocks are already
eroding," said Takahiko Murai, general manager of equities at
Nozomi Securities in Tokyo.
Shares elsewhere in the Asia-Pacific region fell 1.1
percent, snapping a three-day string of gains and bringing the
year-to-date decline to 15 percent, according to an MSCI index
<.MIAPJ0000PUS>.
Shanghai stocks <> eased 1.3 percent in early trade
and are now down 45 percent this year, while Vietnam's small
market <> fell a further 2.4 percent to take year-to-date
losses to 60 percent.
In South Korea, consumer technology heavyweight Samsung
Electronics <005930.KS> led the KOSPI <> 1.4 percent
lower. Samsung's stock fell more than 3 percent after a
Taiwanese paper report that some of the company's chips had
problems.
NOT ALL NEGATIVE
The picture of Asia was not altogether bleak though.
JPMorgan Chase upgraded China to overweight in its model
Asian and emerging market portfolios based on the view that a
stronger yuan will help to contain inflation as Beijing shifts
from managing price pressures to stoking growth.
"Even without a lower oil price, China arguably has the
greatest policy flexibility to manage inflation," said Adrian
Mowat, Asian equity strategist with JPMorgan, in a note.
Indeed, the yuan <CNY=CFXS> was trading at its strongest
against the dollar since being revalued in July 2005, up more
than 6 percent since the year began.
The U.S. dollar slipped 0.15 percent to 107.65 yen <JPY=>,
while the euro rose 0.2 percent to $1.5558 <EUR=>.
The New York Board of Trade's dollar index, a measure of
the U.S. currency's value against a basket of six major
currencies, was down 0.1 percent at 73.321 <.DXY>. The index
hit its highest since late February on Friday but has since
declined as expectations of aggressive rate hikes from the
Federal Reserve fade.
"The market has been reminded about weak elements in the
U.S. economy and feels hesitant now about buying the dollar,"
said a trader at a Japanese trust bank.
Worries about the U.S. economy and lingering credit
concerns also weighed on U.S. stocks overnight, with major
indexes down 1 percent or more. []
Central bankers around the world have been struggling to
balance higher inflation with the need to spur sluggish
economic growth, as housing markets continue to deteriorate,
consumers become more pessimistic and commodity prices climb
ever higher.
Oil prices were a touch lower, with U.S. crude futures for
July <CLc1> down 0.3 percent to $136.21 a barrel, though were
within striking distance of the record of $139.89 hit on
Monday.
Food inflation was almost certainly headed higher, with
U.S. corn futures up for the 12th consecutive session,
following the worst floods in 15 years in the American
agricultural heartland. []
The United States exports half of the world's corn, a third
of its soybeans and almost a quarter of its wheat.
The benchmark 10-year Japanese government bond yield slid 2
basis points to 1.755 percent <JP10YTN=JBTC>.
(Editing by Lincoln Feast)
