* Asian shares fall 3-5 pct after sell-off on Wall Street
* Yen slips back as Japan investors buy abroad
* Oil prices fall to 3-1/2-year low; copper prices fall
By Eric Burroughs
HONG KONG, Dec 2 (Reuters) - Asian equities slid on Tuesday
after signs of a deepening global economic slump slammed stocks
worldwide the previous day, driving benchmark U.S. Treasury
yields to their lowest since the 1950s.
Adding to the gloom, the U.S. economy was confirmed to have
fallen into a recession nearly a year ago and Federal Reserve
Chairman Ben Bernanke said the central bank is mulling extreme
policy measures such as buying more government bonds to revive
growth. []
An array of reports showing manufacturing activity around
the world contracted at the sharpest pace in a decade or more
put focus on the pain the credit crisis has inflicted on
companies and households. []
Safe-haven government bonds climbed, while oil prices fell
to a 3-1/2-year low on the dour outlook for global demand. But
the yen slipped as some Japanese investors shifted funds into
foreign assets.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> dropped 3.5 percent, taking this year's losses
to 57 percent. Hong Kong's Hang Seng index <.HSK> fell 5
percent and was among the hardest hit in the region.
"The (U.S. business cycle) committee's recession statement
confirmed what people have long suspected but were not sure of,
and combined with the U.S. factory data, which confirms the
gravity of the ongoing recession, stoked worries about how much
longer the world's largest economy will be submerged in
economic downturn," said Bae Sung-young, a market analyst at
Hyundai Securities in Seoul.
Japan's Nikkei average <> shed 4.6 percent as the
yen's surge added to the pain for the country's big exporters,
that have suffered a double-whammy from tumbling demand and
currency strength shrinking the value of overseas earnings.
The Reuters Tankan survey of confidence at big Japanese
manufacturers posted its biggest one-month fall on record in
November. []
BATTERED MARKETS
U.S. crude oil prices <CLc1> dropped more than $1 a barrel
to $48.25 a barrel, its lowest since May 2005, extending the
previous session's falls.
On Monday, the S&P 500 index <.SPX> tumbled 8.9 percent,
with investors set to ride out a tumultuous 2008 on a rocky
note.
The yen surrendered some of its gains after bolting higher
on Monday as Japanese investors took advantage of the rise to
buy higher-yielding currencies for cheaper.
The dollar edged up 0.4 percent from late U.S. trade to
93.60 yen <JPY=>, while the euro was a tad higher at 118.25 yen
<EURJPY=R>.
The yen's fortunes remain closely tied to that of stocks
due to its role in the carry trade -- using the low-yielding
Japanese currency to buy higher-yielding currencies and other
assets.
Safe-have government bonds climbed as investors sought a
refuge from the latest flare-up of volatility.
The yield on 10-year Japanese government bonds
<JP10YTN=JBTC> dropped 3.5 basis points to 1.365 percent,
taking them back near lows hit in October when the Nikkei
plunged to a 26-year low.
U.S. Treasuries pushed up in Asia, with the benchmark
10-year note <US10YT=RR> rising 5/32 in price to yield 2.710
percent -- near a five-decade low of 2.650 percent hit on
Monday after Bernanke said the Fed could start buying
Treasuries and agencies.
The Fed is widely expected to cut rates later this month to
0.5 percent, the lowest since the 1950s, and Bernanke said
lower rates are feasible but conventional policy is
constrained.
Long-term government bond yields have also dropped on
mounting expectations inflation in major economies will turn
into falling prices, or deflation, and the sharp drop in
commodity prices.
(Additional reporting by Park Jung-youn in Seoul;) Editing by
Anshuman Daga)
