* Fate of U.S. auto makers darkens, hitting sentiment
* Japan officials stirred after US dollar drops below 90
yen
* 10-yr US Treasury drops to five-decade low below 2.5 pct
* Toyota stock down 10 pct, Honda down 13 pct
* Commodity prices tumble on demand fears
(Recasts, adds details, quotes, European, U.S. outlook)
By Kevin Plumberg
HONG KONG, Dec 12 (Reuters) - Asian stocks plunged more
than 5 percent on Friday after a collapse in the U.S. carmaker
bailout jeopardised the industry, sending investors fleeing to
the safety of government bonds and the yen, which shot to a
13-year high.
The suddenness of the move in the yen, which pushed the
U.S. dollar below the sensitive level of 90 yen, fed concern
Japanese officials would enter the market to stabilise their
currency.
Investors bailed on stocks and piled into U.S. Treasuries,
knocking the benchmark 10-year yield to the lowest in more than
five decades, as the bargain-hunting that had helped to drive
up shares in the last week dried up in the face of a worsening
global economic backdrop.
U.S. stock futures gapped lower, with S&P 500 futures down
5 percent <SPc2>, pointing to a much lower open on Wall Street.
while European stocks were also set to open sharply weaker.
[]
The collapsed bailout led to weakness across commodities,
everything from copper to crude and rubber, as investors
speculated on even weaker demand for raw materials.
Without the help of the $14 billion package of loans, the
potential for the so-called Big Three car manufacturers -- Ford
Motor Co <F.N>, General Motors Corp <GM.N> and Chrysler LLC
[] -- to go under could kill investor sentiment, lead to
higher unemployment and deepen the U.S. recession, economists
said.
"What the failure of this deal does is that it will set
back sentiment not only in the U.S., but also set back
sentiment globally. There is going to be further risk aversion
going forward," said Joseph Tan, chief Asian economist with
Credit Suisse in Singapore.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 5.4 percent, eroding more of its
double-digit percentage gains in the last week. The index is
down 56 percent on the year, easily the steepest decline since
the gauge started in 1988.
Japan's Nikkei share average <> sank 5.5 percent,
snapping four days of rises.
Shares of Toyota Motor Co <7203.T> were off 10 percent and
Honda Motor Co <7267.T> off 12.7 percent on worries about
massive disruption caused to the industry by the collapse of
one of the U.S. automakers.
Hong Kong's Hang Seng index <> was down about 7
percent, weighed by shares of PetroChina <0857.HK><601857.SS>,
Asia's top oil and gas producer, which tumbled 10 percent as
crude prices dropped.
RISK, ONCE AGAIN, IS SOLD
Even before the automaker deal fell apart in the U.S.
Senate, Asian shares had already been under pressure because of
unease about the shrinking financial sector and economic
malaise.
"It shouldn't come as a surprise that Asian equity markets
are selling off today on news of the U.S. auto bailout
failure," said Tim Rocks, equity strategist with Macquarie
Securities in Hong Kong.
"For Asia, the major issue is how much damage is being done
to earnings and balance sheets, and we won't know until
February when companies announce fourth-quarter earnings," he
said.
The rapid shift out of risky assets on Friday propelled the
yen. The U.S. dollar fell as low as 88.40 yen <JPY=>, the
lowest since 1995, before recovering to around 89.75 yen.
The yen's spike prompted Japan's top financial diplomat,
Naoyuki Shinohara, to say the currency movements were too
volatile and the moves in the foreign exchange market were
being watched with concern. The last time the Bank of Japan
intervened in the market, on behalf of the Ministry of Finance,
to cap the yen was in 2004.
"Without an intervention, the dollar could hit 85 yen, so
Japan will likely intervene to prevent that from happening,"
said Masafumi Yamamoto, head of foreign exchange strategy with
Royal Bank of Scotland in Tokyo.
"The worst case scenario for Japanese authorities is that
the yen's appreciation pushes down Japanese share prices which
will further aggravate of the economy, and they see it
happening now."
In the bond market, the yield on the benchmark 10-year note
<US10YT=RR>, which moves in the opposite direction of the
price, slipped to 2.48 percent, the lowest in more than 50
years hit earlier this month.
Maturities of less than a year traded at barely any yield
at all, with the 3-month bill yield <US3MT=RR> flitting between
1.5 basis points and zero. Year-end is usually a time when
global investors and corporates pile into the highly liquid
short-term U.S. debt market to keep cash safe and dress up
balance sheets.
However, the ferocity of the global economic slowdown this
year has made 2009's prospects particularly grim.
U.S. light crude for January 2009 delivery tumbled $2.25 to
$45.73 a barrel, creeping back down toward a four-year low of
$40.50 hit earlier in the month.
Remarks from OPEC President Chakib Khelil overnight about
the need for a big cut in production increased speculation
among traders that supply will be cut by 1-2 million barrels
per day.
(Editing by Lincoln Feast)
