(Repeats to more subscribers)
* Euro thumped to four-year troughs
* Asian stocks have worse day in eight months on risk rout
* Gold, U.S. dollar fly high on haven demand
* Libor, Euribor rates creep higher in nervous market
By Koh Gui Qing
SYDNEY, May 17 (Reuters) - The euro sank to four-year lows
on Monday as angst over Europe's debt crisis led investors to
pull more money from stocks in favour of havens such as gold
and Asian bonds.
So sour was the mood that markets seemed to take scant
notice of a slew of encouraging economic data from the United
States, Japan and Singapore. [] []
[]
Financial bookmakers expect European stocks to suffer too,
with Britain's, German and French stock indices <>
<> <> seen opening down between 0.4-1.2 percent.
"The market has gone into fear mode, and we're seeing red
across the board," said Justin Smirk, chief economist at St
George Bank in New Zealand.
The euro <EUR=> fell 0.7 percent from Friday's close to
$1.2293 as investors doubted fiscally weaker euro zone nations
can tighten their belts, or do so without stunting growth.
Charts suggest the currency may extend losses to $1.23, then
$1.2190.
With bets against the euro at an all-time high [],
traders said the currency looked weak as ever although a brief
bounce on short-covering in the near term could not be ruled
out.
Worryingly, there are signs that anxiety over Europe was
squeezing credit markets, mirroring the days of the financial
crisis when anxious investors and banks hoarded cash.
The tense mood hammered Asian stocks. Japan's Nikkei
<> shed 2.2 percent, and South Korea's stock index <>
lost 2.6 percent. The MSCI measure of Asia-Pacific markets
outside of Japan <.MIAPJ0000PUS> dropped 3.6 percent to head
for its worse day in nine months.
"The worry is really that the fiscal situation in the
southern European states will hit the European economy, and
then the global economy," said Takashi Ushio, head of the
investment strategy division at Marusan Securities in Japan.
"This would affect exporters not only in Japan but also
China as well, raising fears that Chinese economic growth could
cool too.
Shanghai's stock index <>, among the world's
worse-performing stock indices this year due to expectations of
monetary policy tightening, dived 4.1 percent.
While there is speculation that China could revalue the
yuan in a much-awaited move over the next few days before a
China-U.S. summit, choppy markets have led some analysts to
argue that China may hold off for now.
Thai stocks <>, rocked by escalating violence in the
country, fell to a one-month low. []
[]
The downbeat mood in markets benefitted the U.S. dollar.
It's measure against a basket of currencies was strong near
15-month highs at 86.9 <.DXY> as investors favoured the safety
of its liquidity.
A stronger U.S. dollar weighed on commodity prices. Oil
<CLc1> hit its lowest level in over three months, and copper
futures eased too. Shanghai copper touched three-month lows.
[]
In reflection of sluggish metal prices, material stocks
were among the hardest hit. Australian-listed global miners BHP
Billiton <BHP.AX> and Rio Tinto <RIO.AX> shed 4.3 percent and
5.5 percent respectively.
STRENGTH OF EU-ASIA LINKS?
Thomson Reuters data suggested the euro's tumble fuelled
selling in Asian stocks. The correlation between the MSCI index
and the euro-U.S. dollar rate stood at a strong 0.92, up
sharply from around 0.20 a few weeks ago.
Perfect correlation stands at 1 and it means two assets
move in tandem.
Yet, many economists argued real economic links between
Asia and Europe were not strong enough for Europe's problems to
scupper Asian growth.
"Sure, Europe is again the single biggest market for Asia.
But the rest of the world is still a substantially larger buyer
of Asian products," HSBC said in a note to clients.
"And it is here that in recent years all the action has
happened in terms of growth."
Yet, all said, rising funding costs in credit markets
suggest Asia is not insulated from Europe's turmoil.
Three-month Libor <USD3MFSR=> and Euribor rates
<> have crept higher after failing to pull back in
the wake of the mammoth $1 trillion euro zone aid deal struck a
week ago.
The rates, which measure borrowing costs between banks and
reflect credit risks, are at eight- and four-month highs
respectively.
Underscoring the extent of anxiety in markets, gold held up
despite the firm U.S. dollar at $1,237.60 an ounce, within
earshot of a record high of $1,248.95. It hit a record high
when priced in euro. []
Safe-haven government bonds were also in demand. Benchmark
10-year U.S. Treasuries surged, and Japanese five-year yields
hit five-month lows. [] []
(Additional reporting by Adrian Bathgate in WELLINGTON;
Editing by Tomasz Janowski)
