* Stocks fall after U.S. confidence hits post-March low
* Oil and copper prices weaken on economic pessimism
* China stocks at 7-week low
* Australian and New Zealand dollars hurt by risk aversion
By Umesh Desai
HONG KONG, Aug 17 (Reuters) - Asian stocks slid after a
further deterioration in U.S. consumer confidence cast doubts
about the pace of the global economic recovery and soured
appetite for risky assets.
Investors sought the safety of U.S. Treasuries after data
from the world's largest economy showed consumer confidence
fell more than expected in early August, dropping to its lowest
level since March.
Even after data released on Monday showed Japan's economy
became the third G7 country after Germany and France to pull
out of recession, investors continued to shun growth-linked
currencies such as the Australian and New Zealand dollars.
Japan's economy grew 0.9 percent in the three months to
June, ending its longest recession since World War Two as
expected, but analysts say recovery in the world's No.2 economy
could lose steam when a temporary boost from government
stimulus peters out.
Japan's Nikkei share average <>, slumped 2.2 percent,
pulling away from a 10-month high struck on Friday which also
boosted government debt prices with the September 10-year JGB
futures <2JGBv1> hitting their highest since end-July.
"Today's data was driven by stimulus steps in Japan and
overseas, so Japan's economy is far from self-sustaining
growth," said Kyohei Morita, chief economist for Japan at
Barclays Capital.
Commodity bulls retreated, ending the sizzling rally in oil
and copper prices, which were largely fuelled by optimism the
global economy had turned a corner.
Oil prices extended their steep losses made on Friday, when
they fell by the biggest margin since end-July, to trade below
$67 to a barrel and Shanghai copper futures <SCFc3> was limit
down, ending last week's four-day rally.
Oil had rallied for four straight weeks, while copper
prices had their biggest weekly rise in over two months last
Friday.
MSCI LOSSES
The sell-off in Asian stocks was broad-based with
financials, industrials and materials providing the biggest
drag on the MSCI index of Asia Pacific shares traded outside
Japan <.MIAPJ0000PUS> which was down 2.2 percent and within
striking distance of the month's low.
Still, the index is up 75 percent since March 9, when the
global equity rally began on hopes the worst of the economic
slump was over and that the growing signs of recovery would
lead to a brighter outlook for corporate earnings.
China stocks, which have been driven in recent weeks by the
optimism the world's third biggest economy would pull the rest
of the world out of the economic slump, fell to a 7-week low.
The Shanghai Composite Index <> fell to 2,946.068
points, down 3.3 percent and extending last week's 6.6 percent
drop, as investors worried that this year's rally had been
overdone. Still it up 63 percent year to date.
The decline comes on the back of its biggest weekly drop in
five months on Friday with worries about additional share
supplies from IPOs adding to concern over monetary policy and
bank lending.
Monday's wave of risk aversion also hurt demand for higher
yielding currencies like the Australian and New Zealand
dollars, which are closely linked to commodity prices.
The Aussie <ADU=> was well off an 11-month high of $0.8479
struck on Friday, trading around $0.8229, while the kiwi <NZD=>
hovered around $0.6710.
Safe havens like U.S. Treasuries extended last week's gains
with the 10-year Treasury notes <US10YT=RR> yielding 3 basis
points (bps) lower at 3.54 percent as enthusiasm about the
economic recovery waned and confidence grew the Federal Reserve
will keep interest rates near zero and maintain its
quantitative easing policy for a long time.
(Editing by Kazunori Takada)
