* European shares follow Asia down as bank fears resurface
* Nikkei down 2.2 percent after yen hits 15-year high
* Bank worries push euro to record lows vs Swiss franc, A$
* Retreat from risk boosts gold, hits oil
By Alex Richardson
SINGAPORE, Sept 8 (Reuters) - Asian stocks fell on
Wednesday, led by shares in Japan's big exporters as a rise in
the yen to a new 15-year high threatened to erode their
overseas earnings.
Major European stock markets followed Asia lower and the
euro was on the defensive, after renewed fears about the euro
zone banking system drove the single currency to life lows
against the Swiss franc and Australian dollar and hurt
financial stocks. [] []
"I think we can still see some skeletons in the closet in
the European banking sector," said David Cohen, an economist at
Action Economics in Singapore.
Japan's Nikkei <> fell 2.2 percent, with major
exporters prominent among the decliners. Electronics parts
makers Kyocera <6971.T> and TDK <6762.T> both fell more than 3
percent and chip-tester maker Advantest <6857.T> lost 4.4
percent. []
"With the yen's advance accelerating and worries about
credit risks in Europe heightening, the market is pressured by
investor concern about risk-taking," said Kazuhiro Takahashi,
general manager at Daiwa Securities Capital Markets.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> eased 0.5 percent.
Britain's FTSE 100 <> fell 0.5 percent at the opening
and Germany's Dax <> and France's CAC 40 <> both
lost 0.3 percent. The FTSEurofirst 300 <> of leading
regional shares eased 0.1 percent before edging back into
positive territory.
U.S. S&P 500 futures <SPc1> were marginally higher.
Worries about Europe's banks resurfaced on Tuesday, when
the Wall Street Journal reported that some major lenders had
understated holdings in potentially risky government debt
during "stress tests" designed to test their ability to weather
crises.
Ireland added to the jittery mood, extending its guarantees
for short-term bank liabilities amid fears over the escalating
cost of bailing out nationalised lender Anglo Irish [].
[]
PAIN THRESHOLD
The dollar fell to its lowest since 1995 against the yen
<JPY=> as traders probed for options barriers below 83.50 yen
and tested the Japanese authorities' pain threshold for
currency strength, seen as a serious block on recovery for the
export-driven economy.
"The only source of strength in the Japanese economy is
exports," said Michael Hasenstab, Franklin Templeton's
co-director of international bonds, arguing more quantitative
easing steps by Japan were possible and could weaken the yen.
"And with the yen sub-90, they (policymakers) will be under
extreme pressure" to act, he told the Reuters Dealing Room
online chatroom.
Bank of Japan Governor Masaaki Shirakawa reiterated on
Wednesday his reluctance to return to quantitative easing, but
indicated the central bank was weighing its options on how to
deal with the economic impact of the surging yen. []
The dollar dipped as far as 83.34 yen <JPY=>, down 0.5
percent on the day. The euro also fell 0.5 percent to 105.83
yen <EURJPY=R> and was threatening to revisit August's
nine-year low just below 105.50.
"The euro looks precarious again. The dollar will be weak
ahead of the mid-term election. That leaves the yen as the only
currency to buy, especially after Shirakawa made only vague
comments about the yen," a U.S. bank trader said.
The euro was pinned at $1.2720 <EUR=>, having dived from
$1.2870 on Tuesday and a three-week high of $1.2920 the day
before.
Traders are now looking for a test of support around
$1.2625, though they were not keen to go long of the U.S.
currency either given concerns about the country's faltering
economic recovery.
"It's the same old ugly contest -- which currency is the
least unattractive," said a dealer at a local bank in Sydney.
Analysts at BNY Mellon, who track investor flows in and out
of currencies, reported net outflows from the euro and the U.S.
dollar. Wall Street stocks were almost as unpopular as
sovereign bonds from the hard pressed euro zone "periphery"
such as Greece and Ireland.
A broad retreat from riskier assets boosted safe-haven gold
and dented oil, with spot gold <XAU=> rising $6 to $1,259.10 an
ounce, in sight of a lifetime high around $1,264 struck in
June, while U.S. crude <CLc1> eased 0.3 percent to below $74 a
barrel.[] []
"As soon as there is some fear of risk of a double-dip,
people pull out of commodities and equities," said Tony Nunan,
a risk manager with Tokyo-based Mitsubishi Corp.
"People feel that oil demand will pick up as the economy
picks up, but they have been braving that for six months
thinking that inventory would eventually draw down."
Total U.S. petroleum stockpiles are at their highest since
weekly records began in 1990.
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