(Adds European markets, adds details, updates prices)
By Louise Heavens
SINGAPORE, April 8 (Reuters) - Asian shares extended losses
on Tuesday, after news of a possible capital injection at the
largest U.S. savings and loan company failed to eliminate
concerns about more bank writedowns and weakening company
earnings.
Gold futures hovered near a one-week high as rising crude
prices again stirred inflation fears, while Japanese government
bond futures and Treasuries climbed.
The euro rose against the dollar and the yen as investors
sought higher yielding assets in the face of steady euro zone
rates and potentially lower interest rates in the United
States.
European markets were set to open lower, with financial
bookmakers in London predicting Britain's FTSE 100 <>
index will open up to 0.6 percent lower, Germany's DAX <>
0.7 percent lower and France's CAC-40 <> up to 0.9 percent
lower.
Hopes that the global credit crisis may be easing were
boosted on Wall Street by news that Washington Mutual Inc
<WM.N> was close to securing a $5 billion investment.
[]
But concerns that the U.S. recession, rising energy and raw
material costs, and the credit crunch will hurt company
earnings weighed on sentiment.
Banks and other financials were pressured by nagging
worries about further writedowns. Australia and New Zealand
Banking Group Ltd <ANZ.AX> fell in Sydney, and Mizuho Financial
Group <8411.T> slipped in Tokyo.
"Their earnings risk is considerably higher than it used to
be," said Eric Betts, equities strategist at Nomura Australia.
"They are getting squeezed on the margin side and corporate
bad debts are on the rise. They are putting up rates but that
might slow credit growth."
Tokyo's benchmark Nikkei index <> ended down 1.5
percent, having hit a five-week high on Monday.
Some investors were holding back ahead of economic
indicators, such as Japanese machinery orders <ECONJP>, later
this week.
Stocks elsewhere in Asia, as measured by MSCI's index
<.MIAPJ0000PUS> were down 0.7 percent by 0556 GMT. Asia
ex-Japan stocks are down 10 percent this year.
Seoul's KOSPI <> index fell 1.1 percent, Taipei's
TAIEX <> slipped 0.7 percent, and Hong Kong's Hang Seng
<> dipped 0.5 percent. Sydney's S&P/ASX 200 index <>
fell 0.4 percent.
On Wall Street on Monday the Dow Jones industrial average
<> ended flat. Alcoa <AA.N> was the biggest drag on the
benchmark ahead of its earnings. After the close, the aluminium
producer missed expectations by 5 cents a share, saying higher
energy costs and a weak dollar ate into its profit. U.S. stock
index futures <SPc1> <DJc1> pointed to a lower opening in New
York later.
OIL HOVERS UNDER $109
Oil traded just below $109 a barrel, easing slightly from a
$3 dollar rush higher in the previous session after concerns
over disruptions to diesel supply mounted following a fire at a
European refiner.
U.S. crude <CLc1> was 25 cents lower at $108.84 a barrel --
just 2 percent off a record high.
Gold traded at a one-week high, after the oil rally stirred
inflation worries.
Spot gold, traditionally seen as a hedge against oil-led
inflation and an alternative investment to currencies, changed
hands at $917.90/918.80 an ounce.
In currency markets the dollar remained on the back foot,
as last week's jobs data deepened worries about a U.S.
recession, while players eyed comments from G7 euro zone
officials about the strength of the euro.
The euro rose to 161.02 yen <EURJPY=R> and $1.5735 <EUR=>,
while the dollar slipped to 102.34 yen <JPY=>.
"The dollar is weak overall and this is not disorderly
given the U.S. fundamentals. With the prospect of further
declines in U.S. interest rates, it makes sense that few want
to buy the dollar right now," a dealer at a European bank said.
June 10-year JGB futures rose 0.34 point to 139.77
<2JGBv1>, while the benchmark 10-year JGB yield was down 1.5
basis points at 1.325 percent <JP10YTN=JBTC>.
(Editing by Lincoln Feast)
