GLOBAL MARKETS-Asia stocks, commodities hit by swine flu

                                
 * Stock drop 2 pct led by financials, airlines; drugmakers
up
                                
 * European shares seen down, S&P futures shed 1.9 pct
                                
 * Aussie and peso drops, yen climb as risky FX plays
trimmed
                                
 * Commodities mostly lower, oil down more than $1
                                
 By Eric Burroughs
                                
 HONG KONG, April 27 (Reuters) - Asian stocks fell about 2
percent on Monday as the outbreak of swine flu in North America
hurt shares of airlines while prompting some market players to
trim risky positions, hitting currencies such as the Australian
dollar.
                                
 European stock futures <STXEc1> <FDXc1> fell about 1.3
percent, pointing to a weaker open. [.EU]
                                
 Analysts said the initial market reaction was limited but
were wary about the potential economic fallout from the flu
outbreak, especially at a time when the global economy is
starting to show signs of recovering from a deep recession.
                                
 Shares of companies such as Hong Kong's Cathay Pacific
Airways <0293.HK> and Singapore Airlines <SIAL.SI> slid on
worries about whether the potential flu fallout would hurt
global travel, while South Korean poultry and fishery firms
gained on an expected shift in food spending away from pork.
                                
 Mexico's health minister said the swine flu death toll in
the country reached 103 as fears of a global pandemic grew with
new infections in the United States and Canada. [ID:nFLU]
                                
 Investors in Asia are all the more aware of the potential
damage after the outbreak of SARS in Hong Kong six years ago
hobbled the city and regional economy, as well as flare-ups of
bird flu in the past few years.
                                
 Hong Kong and Singapore were among the countries stepping
up use of thermal scanners at airports to prevent entry of
swine flu.
                                
 "This will deepen the global recession and will probably
have a contagion effect on export-led economies in Asia," said
Daniel Chan, senior investment strategist at DBS Bank in Hong
Kong.
                                
 Japan's Nikkei average <.N225> bucked the trend to inch up
0.2 percent as drugmakers such as Chugai Pharmaceutical
<4519.T> jumped on an expected pick-up in flu drug sales, while
banks rose on news that Shinsei Bank <8303.T> was in merger
talks with Aozora Bank <8304.T>.
                                
 The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> dropped 1.8 percent and was off a six-month
peak struck earlier this month.
                                
 After gaining 1.7 percent on Friday, futures on the U.S.
S&P 500 <SPc1> were down 1.7 percent in Asia trade, giving a
boost to safe-haven U.S. Treasuries <RTRTSY1>.
                                
 Hong Kong's Hang Seng <.HSI> shed 2.7 percent, partly due
to a drop in shares of Chinese banks as major foreign
shareholders are expected to sell some of their holdings as
lock-up periods end this week and before they report quarterly
earnings.
                                
 The world's largest lender by market value, Industrial &
Commercial Bank of China <1398.HK>, lost about 4 percent as
investors including Goldman Sachs <GS.N>, Allianz <ALVG.DE> and
American Express <AXP.N> can trade a part of their stakes.
                                
 A report that German regulators had said the country's
banks held about $1.1 trillion of toxic assets also dogged
financial shares, some analysts said. [ID:nLP210732]
                                
 BONDS, AUSSIE AND COMMODITIES RETREAT
                                
 While Treasuries climbed, other government bond markets
showed little reaction to the swine flu news.
                                
 Japanese government bond futures <2JGBv1> pulled back on
the Nikkei's slight gains, shrugging off details about the
Ministry of Finance's plan to increase base JGB issuance by
$174 billion this fiscal year to pay for economic stimulus.
Korean bond futures <KTBc> fell before bond auctions this week.
                                
 In limited Asian trade, the Mexican peso fell about 1.5
percent to 13.665 <MXN=> but trimmed losses. Traders said
activity in the peso would pick up closer to the start of U.S.
trade.
                                
 The Australian dollar -- the highest yielding of big
currencies whose fortunes are tied closely to swings in stocks
and commodities -- shed 1.5 percent to $0.7120 <AUD=D4> after
hitting a session low of $0.7100.
                                
 The dollar index, a gauge of its performance against six
major currencies, climbed 0.4 percent to 85.099 <.DXY>. But the
dollar fell to a one-month low versus the yen at 96.62 yen
<JPY=> as the Japanese currency gained broadly.
                                
 Commodities succumbed to on worries demand will take a hit
due to the spreading flu virus. U.S. crude oil futures were
down $1.25 to $50.30 a barrel <CLc1>, while U.S. soy <SK9> and
corn <CK9> futures both tumbled between 3 percent to 5
percent.
 (Additional reporting by Jun Ebias; Editing by Lincoln Feast)