(Updates with latest Asian index moves, European forecast)
By Lincoln Feast
SINGAPORE, Feb 20 (Reuters) - Asian stocks fell more than 2
percent on Wednesday as a jump in oil <CLc1> above $100 a
barrel rekindled fears that soaring commodity prices will limit
what central banks can do to prop up a slowing global economy.
European shares were also set for a weak start, with stock
futures <STXEc1> pointing to losses of at least 1 percent in
major markets.
Financial stocks led declines in Asia, with losses
accelerating on news that the listed affiliate <KFN.M> of
private equity group Kohlberg Kravis Roberts & Co [] had
again delayed repaying billions of dollars in debt.
[]
"With the uncertainty about credit markets still hanging
around, news like this does spook markets," said Paul Xiradis,
chief executive officer at Australian fund Ausbil Dexia.
The spike in oil, fuelled by expectations that OPEC will
not raise output next month, poses a problem for the Federal
Reserve and other central banks fighting the credit crunch and
falling consumer sentiment.
"A surge in commodity prices, especially oil prices, is
heightening concerns that inflation would pick up at the same
time the global economy is slowing down," said Kim Joon-kie, an
analyst at SK Securities in South Korea.
"That could pose a burden to many central banks around the
world considering cutting interest rates to prevent an economic
slowdown."
Lower interest rates generally make stocks more attractive
compared to other assets and reduce companies' borrowing costs.
Japan's Nikkei average <> ended down 3.3 percent,
while MSCI's index of other Asian stocks <.MIAPJ0000PUS> was
down 2.3 percent at 0640 GMT.
COMMODITY SAFE HAVEN?
The MSCI Asia index has fallen more than 10 percent so far
this year and is 20 percent off its peak in early November.
In contrast, the Reuters-Jefferies CRB index <.CRB>, which
measures a basket of commodities including metals, crops and
energy, jumped to an all-time high on Tuesday and is now up
more than 10 percent this year.
Platinum, wheat, soybeans and gold have all hit record
peaks in recent weeks.
While some investors question whether demand for
commodities can hold up in the event of a sharp or prolonged
fall in global economic growth, others argue they represent a
good inflation hedge and a strong momentum play.
Shanghai copper rose 1 percent after London futures hit a
four-month peak, although platinum <XPT=> retreated from
Tuesday's 14th straight record high.
Strong demand from China pushed soybean and soyoil to
records in Chicago trade, while gold <XAU=> dipped to around
$925 an ounce, having hit a record high of $936.50 on Feb. 1.
Crude retreated to $99.30 after the previous session's 5
percent jump.
The threat of rising prices and the risk it poses for
monetary policy initially rattled government bonds, but prices
recovered as Asian equity markets extended declines.
Japanese 10-year government bond futures <2JGBv1> rose more
than half a point after touching a one-month low in early
trade.
DOLLAR STEADIES
Currency markets largely shrugged off commodity and stock
moves, with the dollar steadying after falls the previous
session.
Markets are waiting for data on U.S. inflation and housing
later on Wednesday as well as minutes from the Fed's January
meeting for clues on the interest rate outlook.
The dollar traded around 107.90 yen <JPY=>, recovering from
a slide to around 107.20 yen on Tuesday.
The euro <EUR=> was little changed around $1.4720, while
inching up against the yen to 158.85 yen <EURJPY=R>.
Among Asian stock markets, Shanghai <> and Hong Kong
<> were both down 2.1 percent, while South Korea <>
and Australia <> dipped 1.9 and 2.2 percent respectively.
Energy stocks fared well, with Japanese oil explorer Inpex
Holdings <1605.T> up 1.8 percent and Australian oil and gas
producer Woodside Petroleum <WPL.AX> gaining more than 4
percent after raising its reserves estimates. []
(Editing by Alan Raybould)
