* European leaders scramble with scattered response to
crisis
* Government bonds, yen climb with stability top priority
* Nikkei at 4-yr low, Korean won at 6-1/2-yr low vs dollar
By Kevin Plumberg
HONG KONG, Oct 6 (Reuters) - Asian stocks fell 2-3 percent
on Monday, led by shares of exporters, after a hectic weekend
in Europe as the financial crisis gathered steam there,
knocking the euro to the lowest in a year.
Concerns about whether the $700 billion rescue plan, which
was approved by the U.S. Congress last week, would be quickly
implemented and whether it would be enough to shore up the
economy left investors seeking safety in U.S. and Japanese
government bonds and buying yen and Swiss francs.
Oil prices fell around $2 to just below $92 a barrel
<CLc1>, dragging down prices of metals and grains, on
expectations damage from dysfunctional financial systems in
developed economies would almost certainly push them closer to
recessions.
"There's just nothing positive out there. Figures are bad
in the States, Europe's bad, Japan's bad and China's probably
slowing," said David Spry, research manager at broker FW Holst
in Melbourne.
Japan's Nikkei share average <> fell 2.5 percent to
the lowest since October 2004. Sectors that derive their
revenues mainly from exports, such as electrical equipment,
machinery and auto makers, led the index lower.
The MSCI index of Asia-Pacific stocks outside Japan slid
2.1 percent <.MIAPJ0000PUS> to the lowest since June 2006.
South Korea's KOSPI <> was down 2.9 percent, led by
shares of Samsung Electronics Co Ltd <005930.KS> and POSCO
<005490.KS>, the world's fourth-largest steelmaker, the biggest
drags.
Korea's markets have been one of the hardest hit by a
wholesale move by foreign investors away from perceived risk in
Asia. The country's growing current account deficit has turned
off investors, and news local banks were having trouble
securing foreign-currency loans added to negative sentiment on
Asia's fourth-largest economy. []
"Although we are not expecting a banking crisis in Korea,
the credit crunch is likely to be most severely felt in Korea
among Asian economies given the highly leveraged Korean
corporate and households," said Ashley Davies, currency
strategist with UBS in Singapore.
The U.S. dollar shot up 3 percent against the won <KRW=> to
the highest in more than six years.
The dollar has been the beneficiary of a move by
institutions and investors to cut the amount of risk in their
portfolio. As a result, the euro <EUR=> fell 0.9 percent to
$1.3642 after earlier falling as low as $1.3610.
The euro was down 1.9 percent at 142.18 yen <EURJPY=>, the
lowest since May 2006.
Europe's scattered response to the financial crisis
enveloping the region also weighed on investors.
Germany gave blanket bank deposit guarantee on Sunday to
prevent panic as officials clinched deals to rescue Germany's
Hypo Real Estate -- after an initial bailout failed -- and
recapitalize two other European banks. []
Divisions in how European leaders think best to approach
the financial crisis were clearly on display. Italian Prime
Minister Silvio Berlusconi said on Sunday that Italy would
revive the idea of a common bank bailout fund at a meeting of
finance ministers on Monday, only a day after the leaders of
Europe's four biggest economies -- Germany, France, Britain and
Italy -- decided against a coordinated bank rescue.
The 10-year Japanese government bond future <2JGBv1> was up
0.5 point at 138.19, rising for a third day.
The yield on the 10-year U.S. Treasury note <US10YT=RR>,
which moves in the opposite direction of the price, fell to
3.57 percent after earlier dropping to 3.52 percent, down from
3.60 percent late on Friday.
(Additional reporting by Sonali Paul in MELBOURNE; Editing by
Lincoln Feast)
