(Repeats to more readers in Asia)
(Updates prices, adds European outlook, comment)
By Jason Subler
SINGAPORE, June 3 (Reuters) - Asian stocks fell on Tuesday,
led by financial firms and exporters, as renewed worries about
further damage from the global credit crunch prompted investors
to seek shelter in safer assets such as government bonds.
Shares extended early losses after the Wall Street Journal
reported that Lehman Brothers <LEH.N> may raise another $3-4
billion in fresh capital, suggesting it could post its first
quarterly loss since going public. (Click on [] for
more details.)
European stocks also opened lower, with the FTSEurofirst
300 <> index of that region's top stocks falling 0.4
percent in early trade.
The Lehman report added to credit worries triggered by a
spate of negative news overnight, including ratings agency
Standard & Poor's downgrading the debt ratings of three major
U.S. investment banks, sparking selling in the dollar, weighing
on Asian stocks and boosting demand for safe-haven government
bonds.
"We're going to go back perhaps to a more fragile view
about credit markets and equity markets," said Sean Darby, an
equity strategist at Nomura in Hong Kong.
"Summer's around the corner, and I suspect that markets are
going to drift off. They won't necessarily touch the January
levels, but we'll see these markets still produce negative
returns for the best part of Q2," he said.
The dollar was down 0.3 percent from late U.S. trade at
104.15 yen <JPY=>, moving away from a three-month high of
105.88 yen hit last week.
That extended the Japanese yen's gains from Monday, when it
saw 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.
"The market is very cautious about developments with
troubled financial firms," said Hideaki Inoue, chief manager of
forex trading at Mitsubishi UFJTrust Bank in Tokyo.
"But market players are psychologically better prepared for
bad news compared to what it was like in March when dollar/yen
tumbled as if in a free-fall below 100."
Japan's Nikkei share average <> ended down 1.6
percent, snapping a three-day winning streak, with exporters
such as Honda Motor Co Ltd <7267.T> leading the decline on
concerns that a stronger yen would dash overseas demand for
Japanese goods.
The MSCI index of shares in the Asia-Pacific region outside
Japan <.MIAPJ0000PUS> was down 1.8 percent in late afternoon,
compared with a 0.4 percent drop mid-morning, putting it on
course to end a three-day run of gains.
A pan-Asian index <.MIAS00000PUS> was down 1.3 percent.
FLIGHT TO QUALITY
Hong Kong shares <> extended early losses to fall 2.1
percent, weighed by the Lehman report and hefty losses in
Chinese telecoms stocks, as investors locked in gains in the
run-up to a recent announcement of an industry reshuffle.
The Korea Composite Stock Price Index <> was down 1.5
percent. Taiwan's TAIEX index <> fell 1.7 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 1.6 percent to a five-week low, led by
declines in financial firms such as Macquarie Group <MQG.AX>.
Macquarie, the country's top investment bank, slumped 6
percent.
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.
U.S. Treasuries climbed for a second day as investors
sought safer bets and as some rushed to cover short positions
after a slide last week pushed yields to a five-month peak
above 4 percent.
Japanese government bond futures jumped, matching their
biggest daily gain in five years hit in March, with June
10-year JGB futures ending up 1.43 point at 135.35 <2JGBv1>.
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.
JGB futures extended gains to rise a full point, with June
10-year futures <2JGBv1> rising as high as 135.52, up more than
a point on the day.
Crude oil prices fell slightly, with the July contract
easing 26 cents to $127.50 a barrel. But crude prices are still
up a third since the start of the year, prompting concerns over
their drag on economic growth and adding to global inflationary
pressures.
(Additional reporting by Satomi Noguchi and Masayuki Kitano in
TOKYO)
(Editing by Kim Coghill)
