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By Jason Subler
SINGAPORE, June 3 (Reuters) - Asian stocks fell on Tuesday,
led by financial firms, as renewed worries about further damage
from the global credit crunch prompted investors to seek
shelter in safer assets while the Japanese yen held sharp
overnight gains.
Reigniting credit worries, ratings agency Standard & Poor's
on Monday downgraded the debt ratings of three major U.S.
investment banks, Wachovia <WB.N> ousted its chief executive
and British mortgage lender Bradford & Bingley <BB.L> warned of
increased risks of default.
Those concerns sent the three major U.S. indexes <.SPX>
<> <> down over 1 percent overnight and pushed the
Japanese yen up to its biggest daily gain against the dollar in
nine weeks as investors unwound yen carry trades, in which the
low-yielding currency is used to buy riskier assets elsewhere.
"Forgotten problems were brought up again," said Fumiyuki
Nakanishi, a group manager in the investment research
department at SMBC Friend Securities in Tokyo.
Japan's Nikkei share average <> fell 1.5 percent in
early trade on Tuesday, with exporters such as Honda Motor Co
Ltd <7267.T> leading the decline on concerns over the impact of
a stronger yen and shakier U.S. demand on their overseas sales.
Financial shares such as top Japanese lender Mitsubishi UFJ
Financial Group <8306.T> also fell on the renewed worries over
the prospects of the financial sector.
The MSCI index of shares in the Asia-Pacific region outside
Japan <.MIAPJ0000PUS> dropped 0.4 percent, while a pan-Asian
index <.MIAS00000PUS> fell 0.9 percent.
Seoul shares weakened, with the Korea Composite Stock Price
Index <> down 1.2 percent. Taiwan's TAIEX index <>
was down 1 percent, hit by falls in technology companies such
as TSMC <2330.TW>, which rely heavily on exports.
Australian shares also fell, with the benchmark S&P/ASX 200
index <> down 0.7 percent, led by declines in financial
firms such as Macquarie Group <MQG.AX>.
Data on Tuesday showed that Australian approvals to buy new
homes jumped unexpectedly in April, but analysts said they
still expected the central bank to keep interest rates on hold
at a 12-year high of 7.25 percent after its meeting today.
The Reserve Bank of Australia has raised rates four times
since August to slow a booming economy and restrain core
inflation, which accelerated to a 17-year high in the first
quarter.
FLIGHT TO QUALITY
The renewed warnings that the credit crisis sparked by
defaults in U.S. subprime mortgages is not yet over gave broad
support to assets that are seen as less risky, even though high
inflation is prodding investors to seek higher yields.
The benchmark 10-year yield on Japanese government bonds,
which moves in the opposite direction of the price, fell 6.5
basis points to 1.720 percent <JP10YTN=JBTC>, pulling away from
a 10-month high of 1.805 percent hit last Thursday.
"JGBs are taking cues from the flight-to-quality type moves
seen in U.S. and European markets as concerns about the
financial sector re-emerged," said Naomi Hasegawa, senior
fixed-income strategist for Mitsubishi UFJ Securities.
The dollar was trading at 104.62 per yen <JPY=> on Tuesday,
as the yen slipped a touch from its close on Monday but largely
held its sharp gains made the previous session.
Crude oil prices were steady, with the July contract
largely unchanged at $127.30 a barrel. But crude prices are
still up a third since the start of the year, prompting
concerns over their drag on economic growth.
(Additional reporting by Taiga Uranaka and Masayuki Kitano in
TOKYO; Editing by Lincoln Feast)
