By Tom Miles
HONG KONG, Jan 31 (Reuters) - Investors sold financial
stocks and the dollar on Thursday as concerns about two top
U.S. bond insurers' credit ratings reinforced fears about the
health of the U.S. economy.
Speculation on financial television network CNBC that
credit rating firms would downgrade Ambac Financial Group Inc
<ABK.N> and MBIA Inc <MBI.N> pushed both down more than 10
percent, drowning out the cheers for Wednesday's 50 basis point
interest rate cut by the U.S. Federal Reserve. []
The Dow Jones industrial average <> closed down 0.3
percent, returning to a downward path after a flicker of
support following the rate cut, which came hard on the heels of
an emergency 75 bp cut eight days before.
Most Asian stockmarkets started the day slightly lower, but
MSCI's measure of Asia Pacific stocks excluding Japan
<.MIAPJ0000PUS> was flat at 0149 GMT, as South Korean traders
found some buying opportunities amid the gloom.
"The U.S. market reacted more to negative news as a
half-percentage-point (Federal Reserve) rate cut had been
already factored in," said Naoki Koga, senior fund manager at
Toyota Asset Management.
"But as the Fed will likely keep lowering rates in the
future, investors may soon see that as positive and that will
be good for the market."
A Reuters poll showed 15 out of 16 primary dealers on Wall
Street surveyed after Wednesday's rate cut expect the central
bank to trim rates again at its next meeting in March. []
Expectations of lower U.S. rates weighed on the dollar,
which hit an all-time low against the Swiss franc at 1.0814
franc <CHF=> on electronic trading platform EBS in early Asian
trade before recovering to 1.0840 franc. Against the yen
<JPY=>, it slumped towards 106 before recovering to 106.5.
Crude oil prices <CLc1>, which had risen past $92 a barrel
on Wednesday and would normally gain from a weaker dollar and a
helping hand from the Fed, fell as far as $90.80 and stood at
$91.10, $1.23 down on the day.
Safe-haven gold <XAU=> rose slightly to $925.25/6.00 an
ounce, just shy of the record $933.10 set on Tuesday.
SHIPS AND CHIPS ON THE DIPS
Seoul's main KOSPI <> rose 1 percent, with battered
shipbuilders such as STX Pan Ocean <028670.KS> seen as oversold
and cheered by a 5 percent jump in the Baltic Exchange's dry
freight index <.BADI> on Wednesday. Chip makers also rose on
stabilising DRAM memory chip prices.
"Markets in Asia fell quite a bit on Wednesday before the
Fed meeting, preceding a Wall Street fall, so we are seeing
some interest from investors buying on dips," said Kang
Mun-seok, an analyst at Korea Investment & Securities.
"But the first quarter will continue to be rocky as more
negative news from the subprime mortgage crisis will be
unearthed."
Japan's Nikkei average <> and the broader TOPIX
<> were rose about half a percent, although top bank
Mitsubishi UFJ Financial Group (MUFG) <8306.T> and other bank
stocks fell on worries about the U.S. bond insurers.
Japanese government bonds [] rose to track a rally in
U.S. Treasuries after the Fed's latest cut, while recent
weakness in Tokyo shares also spurred buying of safe-haven
government debt.
"The JGB market continues to take its cue from stocks, but
it's mainly driven by incentives to earn quick profits from
dealings rather than investment based on a clear conviction
that the Bank of Japan will cut interest rates," said Naomi
Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ
Securities.
In Australia, the benchmark S&P/ASX 200 index <>
levelled out after an early slip as investors bought into talk
that the world's two biggest miners, BHP Billiton Ltd <BHP.AX>
and Rio Tinto Ltd <RIO.AX>, might be able to negotiate a
friendly merger.
(Additional reporting by Elaine Lies, Chikako Mogi, James
Topham and Aiko Hayashi in TOKYO; Kim Soyoung in SEOUL, Sonali
Paul in SYDNEY; Editing by Lincoln Feast)
