(Updates with Japan share market close)
By Kevin Plumberg
HONG KONG, May 21 (Reuters) - Asian stocks fell for a
second consecutive day on Wednesday, feeding a rally in
safe-haven government bonds, as investors feared consumer
demand would falter in the face of high oil prices.
Japanese stock indexes were Asia's biggest decliners, with
the broad TOPIX <> posting its largest single-day drop
since May 9, after U.S. light crude climbed to a record $129.60
a barrel on Tuesday, driven by concern about dwindling global
stockpiles.
The rise in the oil price was given added impetus by a
prediction from billionaire investor T. Boone Pickens that
prices could hit $150 a barrel in the next six months.
Printer and copier maker Canon Inc <7751.T> led Japan's
Nikkei share average <> down 1.6 percent to 13,926.30
after Wall Street tumbled on disappointing earnings from U.S.
retailers, fuelling concern about a slowdown in demand.
A second day of strength in the yen also weighed on
Japanese exporters, dragging the TOPIX down 2.1 percent.
By 0630 GMT, the MSCI index of Asian stocks excluding Japan
<.MIAPJ0000PUS> was off 1 percent at 491.54 after hitting a
four-month high on Monday.
Stocks in China bucked the declining trend, rising late in
the session. Hong Kong's Hang Seng index <> jumped 0.7
percent, driven by energy producers CNOOC Ltd <0883.HK> and
Sinopec Corp <0386.HK>.
South Korean stocks <> fell 1.4 percent as negative
sentiment spread across the region, especially after news that
core U.S. producer prices in April had their biggest annual
gain since December 1991.
European stock index futures pointed to a flat start on
Wednesday, showing signs of stabilising after the previous
session's sharp sell-off. The FTSEurofirst 300 index <>
of top European shares slid 2 percent on Tuesday in its worst
one-day fall in two months.
The fear evident in the stock market steered investors
toward U.S. Treasury debt. The yield on the 10-year Treasury
note, which moves inversely to the price, edged lower for a
third day to the lowest in a week.
"The trend in bonds depends on stock prices, and stocks
were sold on concerns that higher crude oil prices will hit
consumers' wallets and squeeze corporate profits," said
Yasutoshi Nagai, chief economist at Daiwa Securities SMBC.
LOOKING FOR SAFETY
Japanese government bond (JGB) futures rebounded from a
seven-month low hit last week as investors became fearful that
soaring oil prices would hit corporate profits and heighten the
risks to the domestic economy.
"The theme of the market could shift back to the economic
slowdown and credit crunch," Eiji Dohke, chief JGB strategist
at UBS Securities, said in a note to clients.
June 10-year JGB futures <2JGBv1> were up 0.39 point at
135.86 after jumping as high as 136.09 early in the session.
The benchmark 10-year yield <JP10YTN=JBTC>, which moves
inversely to the price, dipped 3.5 basis points to 1.605
percent, well off a seven-month high of 1.710 percent hit on
Friday.
Overnight gains in U.S. Treasury bonds also helped. The
benchmark 10-year Treasury yield <US10YT=RR> was at 3.7727
percent, down from 3.7803 percent on Tuesday and 14 basis
points lower than a week ago.
However, South Korean government bond yields rose after the
finance ministry revived fears about possible measures to curb
short-term external borrowing.
Adding to unease among investors, OPEC Secretary General
Abdullah al-Badri told Reuters that speculation and a weak U.S.
dollar, not supply and demand, are driving up oil prices.
[]
The U.S. dollar was steady against the euro at $1.5656
<EUR=> ahead of the Ifo index of German business sentiment for
May due later in the day. The New York Board of Trade's U.S.
dollar index fell to a one-month low of 72.304 <.DXY>.
The U.S. dollar was particularly weak against Asian
currencies, falling 0.8 percent against the South Korean won to
1,041.80 won <KRW=> and 0.4 percent against the Malaysian
ringgit to 3.2280 ringgit.
"For this week, inflation data from Malaysia, Hong Kong and
Singapore, as well as a Bank of Thailand meeting later today,
could spark renewed interest in Asian currencies as the
growth-inflation balance tilts towards keeping consumer prices
in check," said economists at United Overseas Bank in a
research note.
Gold, often used by investors to hedge against inflation,
was trading at $919.50 an ounce <XAU=>, near a one-month high
of $923.40 hit on Tuesday.
