* Focus on Lehman results due ahead of U.S. market open
* Oil above $104 on effective OPEC output cut
* Investors' allergy to risk worsens despite Fannie,
Freddie
(Repeats to more subscribers without any changes to text)
By Kevin Plumberg
HONG KONG, Sept 10 (Reuters) - Asian stocks fell more than
1 percent on Wednesday, hurt by financial shares ahead of
results from Lehman Brothers, which has been rocked by the same
crisis that led Washington to take over Fannie Mae and Freddie
Mac this week.
Oil prices rose toward $104 a barrel, reversing earlier
losses, after OPEC agreed to return to its 2007 production
target, an effective cut in output. But crude remains close to
$100, below which Goldman Sachs said earlier this week could
signal a global recession. A retreat in oil prices from a
record high in July has supported the U.S. dollar, which hit an
11-month high against the euro on Tuesday.
While the U.S. government bailout of its top mortgage
finance companies on Sunday has removed a big risk of a
system-wide failure, problems at other financial institutions
were painful reminders of how severely an avalanche of bad
loans has threatened almost every major economy.
Shares of firms such as Macquarie Group Ltd <MQG.AX>,
Australia's largest investment banks, and Mizuho Financial
Group <8411.T>, Japan's second-largest lender, sank after
Lehman stock <LEH.N> plunged 45 percent overnight on fears it
would not be able to raise the funds it needs to survive.
Lehman reports its quarterly results ahead of the U.S.
stock market open.
"Today's fall is a Lehman shock," said Yoku Ihara, manager
of the investment information department at Retela Crea
Securities. "We thought the market would rebound after the
Freddie and Fannie news, but Lehman rekindled worries."
Tokyo's Nikkei share average fell 1.1 percent <> after
briefly touching a six-month intraday low earlier.
Australia's benchmark S&P/ASX 200 index <> was down 2
percent, led by shares of miners BHP Billiton <BHP.AX> and Rio
Tinto Ltd <RIO.AX>.
The Asia-Pacific index of shares traded outside of Japan
was 1 percent lower <.MIAPJ0000PUS>, moving back towards
Friday's 22-month low.
Hong Kong's Hang Seng index <> dropped 2.3 percent,
with shares of the world's largest cellular operator China
Mobile <0941.HK> the biggest drag.
Government bonds meanwhile benefited from the worries about
Lehman Brothers and the fall in stocks. The September 10-year
JGB futures rose 0.73 point to 137.60 <2JGBv1>.
The euro edged up 0.2 percent to $1.4140 <EUR=>, but is
nearly 20 cents lower than where it was in mid July when crude
prices peaked.
The dollar gained ground against the yen, rising 0.3
percent to 107.25 yen <JPY=>, largely as dealers covered their
short-term bets on the Japanese currency.
DOLLAR BEARS
A combination of falling commodity prices, a revulsion
toward risk taking and signs of economic gloom spreading to
Europe and Japan have all pushed the dollar higher for the last
two months.
However, some fund managers are holding fast to their
long-term negative view on the U.S. currency.
"Financial institutions which speculated with shareholders
money (while engaging in at best borderline legal practices)
will be uncovered, and the long-term effect will be a more
conservative and slower growing capital market in the developed
world. This is bearish for the U.S. dollar," said Guild
Investment Management, a Los Angeles-based firm, in a note.
While gauges of investors' distaste for risk taking have
fallen from mid-July highs, they have risen steadily so far in
September. The so-called TED spread of 3-month borrowing rates
among large banks over the 3-month U.S. Treasury bill yield
widened to the most since July 23 on Wednesday.
The October U.S. light crude future was up around $1 to
$104.20 a barrel <CLc1>, after earlier tumbling to near $102.
OPEC formally agreed to return to its 2007 production
target of 28.8 million barrels per day.
The oil cartel had been widely expected to maintain current
production targets at its meeting in Vienna, although some
ministers had advocated tighter compliance with formal limits
by members who were overproducing their targets.
(Additional reporting by Aiko Hayashi in TOKYO, editing by
Dhara Ranasinghe)
