* Jubilation over Fannie, Freddie bailout ends abruptly
* Safety first: Bank shares dive, yen gains
* Oil below $106 with U.S. dollar strong vs euro
(Repeats to additional subscribers with no change to text)
By Kevin Plumberg
HONG KONG, Sept 9 (Reuters) - Asian stocks fell and
government bonds rose on Tuesday in a sobering realisation the
U.S. takeover of Fannie Mae and Freddie Mac has addressed some
risks stemming from the financial crisis but has not solved it.
Large bank shares underperformed the rest of the market
after a broad global financial sector rally on Monday, while
currencies association with safety and stability such as the
yen and Swiss franc strengthened.
"It was a knee-jerk reaction yesterday, but the long-term
outcome is that you are not going to expect the U.S. economy to
improve if the housing market does not fix itself," said
Lucinda Chan, a division director with Macquarie Equities Ltd
in Sydney.
Japan's Nikkei share average <> fell 1.3 percent, led
by shares of companies associated with the technology sector or
consumer demand, such as Kyocera Corp <6971.T> and Fast
Retailing Co Ltd <9983.T>.
Stocks of large banks such as Mitsubishi UFJ Financial
Group <8306.T> fell, though Merrill Lynch recommended buying
Asian bank shares in part because they outperformed strongly
after the U.S. federal government stepped in during the
meltdown of hedge fund Long-Term Capital Management in 1998.
Outside of Japan, Asia-Pacific stocks slipped 0.7 percent
<.MIAPJ0000PUS> after posting their biggest daily gain of 2008
on Monday, according to an MSCI index.
Hong Kong's Hang Seng index <> fell 1.8 percent and is
off 26.6 percent so far this year.
Washington's bailout of the top U.S. mortgage finance
companies on Sunday, which could be the most expensive ever,
won acclaim from policymakers around the world, eager for
positive news after more than a year of fallout from the credit
crisis.
The move to place the companies under conservatorship,
similar to bankruptcy, also had an immediate effect on U.S.
mortgage rates, which fell half a percentage point.
However, whether housing prices will stop falling is
another issue altogether.
"The bottom line is that buyers are still not interested in
buying depreciating assets and in any case have less money to
do so whilst lending conditions remain tight and the inventory
overhang is still huge," Calyon analysts said of the U.S.
housing market in a note sent to clients.
"For now, the taxpayer is becoming increasingly embroiled
in the housing market crisis and things will get worse before
there is any sign of a turnaround."
The U.S. dollar rose against the euro but fell against the
yen and Swiss franc as more cautious trades pushed out the rush
of risk taking on Monday.
The dollar fell 0.6 percent against the yen to 107.50 yen
<JPY=>, though it remains well above a two-month low around
105.50 yen hit on Friday.
The euro edged down 0.2 percent to $1.4085 <EUR=>, creeping
back down toward an 11-month low around $1.4050 hit on Monday.
Oil prices slipped with the dollar, which was trading near
a one-year high against a basket of currencies. Hurricane Ike
was heading toward rigs in the Gulf of Mexico, an energy-rich
area still recovering from Hurricane Gustav, putting a floor
under oil.
The October U.S. light crude future was down 35 cents to
$105.99 a barrel <CLc1>, having plunged $41 from an all-time
high reached in July.
Goldman Sachs equity analyst Arjun Murti said on Monday oil
prices could fall below $100 a barrel in the event of a global
recession and a rapid slowdown in China. The front-month oil
contract has not traded below $100 since April 2008.
The benchmark 10-year Japanese government bond yield fell
3.5 basis points to 1.490 percent <JP10YTN=JBTC>, pulling away
from a one-month high of 1.550 percent hit on Monday.
(Additional reporting by Denny Thomas in SYDNEY; Editing by
Lincoln Feast)
