* Asian shares fall 3-5 pct after sell-off on Wall Street
* Oil prices fall to 3-1/2-year low; copper prices fall
* Yen gains limited as Japan investors shift funds abroad
* JGB 10-yr yield falls to 8-mth low on safe-haven buying
(Adds comments, European outlook)
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.
European shares were set to drop between 1.5 percent and 2
percent, according to financial bookmakers.
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 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. []
"Investors knew the economy was bad, but a series of
economic indicators showed it had deteriorated far more than
expected," said Soichiro Monji, a chief strategist at Daiwa SB
Investments. "It's become clear that it's not just the United
States but everyone."
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> dropped about 4.5 percent, taking this year's
losses to nearly 60 percent.
Safe-haven bonds attracted funds, with solid demand at a
10-year Japanese government bond auction helping drive their
yields to an eight-month low. Oil prices fell to a 3-1/2-year
low on the dour outlook for global demand, while the yen gained
on the flare-up of risk aversion.
Global central banks are slashing rates and unveiling new
steps to unclog credit markets and contain the economic damage
from the 15-month crisis.
The Reserve Bank of Australia chopped rates by a full
percentage point to 4.25 percent on Tuesday, a 6-1/2-year low.
The Bank of Japan widened the types of corporate debt its
accepts in money market operations to bring down steep
borrowing costs. []
Japan's Nikkei average <> tumbled 6.4 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, a proxy of the BOJ's quarterly poll, posted its
biggest one-month fall on record in November. []
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.
BATTERED MARKETS
U.S. crude oil prices <CLc1> fell nearly $2 to $47.58 a
barrel, its lowest since May 2005, extending Monday's drop.
The yen recovered from an initial dip as Japanese investors
took advantage of the rise to buy higher-yielding currencies
for cheaper. Data from Ministry of Finance has showed Japanese
investors have been steady buyers of foreign stocks since
September.
The dollar slipped 0.1 percent from late U.S. trade to
93.17 yen <JPY=>, off a session high of 93.82 yen and has
retreated back near a 13-year low hit in October. The euro was
down 0.1 percent at 117.52 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.
The Australian dollar took a hit from the big RBA rate cut
and tumble in commodity prices. The Aussie was down 2 percent
at $0.6343 <AUD=D4>.
Safe-have government bonds climbed as investors sought a
refuge from the volatility.
The yield on 10-year Japanese government bonds
<JP10YTN=JBTC> dropped 5 basis points to 1.350 percent and hit
a low of 1.345 percent, the lowest since April.
U.S. Treasuries pushed up in Asia, with the benchmark
10-year note <US10YT=RR> rising 6/32 in price to yield 2.707
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.
(Additional reporting by Elaine Lies in Tokyo; Editing by
Dhara Ranasinghe)
