* Euro hits six-week lows; Ireland woes weigh
* Nikkei reverses into losses after hitting five-month
peaks
* Firm U.S. dollar drags on commodities
(Repeats to more subscribers)
By Koh Gui Qing
SYDNEY, Nov 16 (Reuters) - The euro briefly hit six-week
lows against the dollar on Tuesday and Asian stocks slid as
concerns Ireland may not repay its debt encouraged investors to
take profits after a strong autumn rally.
Another sharp sell-off in Chinese stocks in late trade also
unnerved some investors and led them to wonder if prices of
riskier assets were turning lower for good.
The tepid mood in equity market spilled into Europe.
Britain's FTSE 100 <> fell 0.7 percent and France's CAC 40
<> lost 0.8 percent.
The Shanghai Composite Index <> slid 4.3 percent at
one point as investors, worried China may further tighten
monetary policy, sold blue-chip bank and energy shares. []
"The swings in China are radical in the last few days,"
said Jackson Wong, an investment manager at Tanrich Securities
in Hong Kong. "People are still trying to figure out if this is
the beginning of a downtrend."
The overall cautious tone kept the MSCI Asian stock index
outside Japan <.MIAPJ0000PUS> down 0.1 percent, an
insignificant move compared to its 16 percent jump since early
September.
Japan's Nikkei <> initially bucked the downdraft and
rose to five-month highs, but it too eventually succumbed to
end down 0.3 percent. []
Uncertainty over whether Ireland, faced with record
borrowing costs, needs to be bailed out by its euro zone
partners to pay its debts also did little for the market mood.
As it is, Ireland's woes have raised borrowing costs for
other fiscally strapped euro zone nations such as Spain and
Portugal. Euro zone officials are set to meet later to try to
find a way to end Ireland's debt crisis. []
The euro fell as far as $1.3560 <EUR=> at one point, but
clawed back by late trade after dovish remarks from a Federal
Reserve official nudged the dollar lower. []
But the dollar stayed firm on the day and depressed prices
of most commodities. Oil <CLc1> lost 0.8 percent to pull
further away from last week's 25-month highs [].
Yet, some analysts thought the latest pull-back in prices
had less to do with a reassesment of market risks, and more to
do with investors wanting to take profits and cut stretched
bets.
"The European markets could potentially cause contagion
pressures to erupt if people start liquidating. But
realistically the dynamic within Asia remains very strong,"
said Peter Redward, the head of emerging Asia research at
Barclays in Singapore.
Underscoring Asia's sturdy economic growth, the South
Korean central bank raised interest rates on Tuesday and hinted
there could be more hikes to come. []
That Asia is tightening policy is a world away from the
United States, where a Fed official said on Tuesday an exit
from the present super-loose policy may be "years away".
RISING US YIELDS
For some, the recent creep up in U.S. Treasury yields is
among the more startling turn in the market as it could choke
off a recovery in the U.S. economy by raising borrowing costs.
For now, analysts said the sell-off in Treasuries was
driven by profit-taking and uncertainty over whether the Fed
would ultimately buy the $600 billion worth of bonds it had
promised.
"Somewhere down the track, especially if the U.S. dollar
does continue to rise and U.S. yields do continue to back up,
the economic recovery may begin to stall again," said Greg
Gibbs, an analyst at RBS in Sydney.
The 10-year Treasury yield <US10YT=RR>, a benchmark for
U.S. mortgages, spiked 17 basis points on Monday, its biggest
jump in any single day since June 2009.
It stood at 2.90 percent in late Asian trade. Some traders
expected it would eventually grind towards four-month highs of
3 percent.
Rising U.S. yields bodes well for the U.S. dollar however,
as it reduces its allure as a funding currency for carry
trades.
The yield gap of 10-year U.S. Treasuries over 10-year
Japanese government bonds is near a three-month high of 190
basis points. <US10YT=RR> <JP10YTN=JBTC>.
(Additional reporting by Jun Ebias in HONG KONG and Masayuki
Kitano in TOKYO)
(Editing by Miral Fahmy)
