* Unemployment rising globally, Japan factory output
plunges
* Japan's Nikkei drops 10 percent in January
* Dollar, yen lifted by renewed flight to safety
* New Zealand dollar at 6-yr low after central bank
comments
(Recasts, updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, Jan 30 (Reuters) - Japanese stocks fell on
Friday and the yen and U.S. dollar rose as investors retreated
to safety with job losses and collapsing manufacturing
deepening a global recession while Washington scrambled to
salvage banks.
Major European stocks were expected to open down as much as
0.7 percent, according to financial bookmakers, ahead of euro
zone unemployment data and the first look at U.S. gross
domestic product for the fourth quarter.
Wall Street shares dove after a report said continuing
claims for U.S. unemployment were at a record high, while
Japanese stocks fell 3 percent after data showed unemployment
in the world's second-largest economy at a near three-year high
and industrial output plunging by a record 10 percent last
month.
The New Zealand dollar, once favoured by investors because
of its high yield, dropped to another six-year low after the
country's central bank governor said interest rates will likely
have to be cut further, a day after they were slashed by 150
basis points.
The severely weak economic reports supported expectations
that Japan's economy on an annual basis shrank by a
double-digit percentage in the last three months of 2008. Focus
later this evening will be on the U.S. GDP report, which is
expected to show the economy shrank in the fourth quarter by
the most since 1982.
"There is no sign of bottoming out. As industrial output
posted a record drop, it is hard to expect a recovery anytime
soon," said Daisuke Uno, chief strategist at Sumitomo Mitsui
Banking Corp in Tokyo.
The 3.1 percent decline on the day of Japan's Nikkei share
average <> led the region, with the index sliding 9.8
percent in January -- its largest monthly decline since October
2008.
Toyota Motor Co stock <7203.T> fell 4.1 percent after a
company source told Reuters operating losses for the fiscal
year ending March 31 will likely be bigger than the 150 billion
yen forecast by the top automaker. []
Stocks in Asia-Pacific outside Japan <.MIAPJ0000PUS> were
down 0.7 percent on Friday and 8 percent in January, according
to an MSCI index.
Hong Kong's Hang Seng index <> fell 0.5 percent, led by
a 3.75 percent drop in HSBC <0005.HK> stock, which is being
hounded by speculation about dividend cuts and the need for
additional capital.
HOPE IS TROUNCED
Some optimism trickled into markets earlier this week after
the U.S. Congress progressed on a $825 billion stimulus
spending package and other efforts to ease the blow of a severe
recession. Yet, the White House plan is expected to face
formidable opposition in the Senate.
In addition, the fate of the banking industry was still up
in the air, with government negotiations about a plan to
separate bad assets at the banks hitting a snag, according to
CNBC TV. []
Downward pressure on equity markets lent some support to
U.S. Treasuries. The yield on the benchmark 10-year note
<US10YT=RR>, which moves in the opposite direction of the
price, slipped to 2.82 percent from 2.88 percent late on
Thursday in New York.
However, the yield was up around 60 basis points in
January, the biggest one-month rise since April 2004, with
investors concerned about the amount of new borrowing needed to
finance the government's legion of rescue plans.
Institutional investors have lately sensed far more value
in buying sovereign bonds in Canada, Britain and even Spain and
Italy, according to State Street Global Markets, which tracks
15 percent of the world's tradeable assets. Speculation has
been rife that fiscal problems within Europe may endanger the
euro zone, but large investors seemed to be betting against
that outcome.
Despite the persistent selloff of U.S. stocks and
Treasuries, the dollar was a stalwart in January, strengthening
5.4 percent against a basket of major currencies <.DXY>. The
currency's deep liquidity and continued status as the world's
top reserve currency have acted like magnets for investors
fleeing risks that have mushroomed throughout the financial
crisis.
"We remain positive on the dollar as we retain our view
that regardless of policymaker actions at this stage, it will
take time for the entire financial system and the global
economy to adjust, and conditions will likely remain
unfavourable for risk in the immediate future, despite signs of
stabilisation," UBS currency strategists said in a note to
clients.
The euro fell 0.4 percent from late U.S. trade to $1.2904
<EUR=> after European Central Bank President Jean-Claude
Trichet warned overnight the ECB could push interest rates
below 2 percent and data showed the biggest monthly jump in
German unemployment in four years.
The dollar dipped 0.7 percent to 89.37 yen <JPY=> though
month-end dollar demand from Japanese companies capped losses.
U.S. crude prices were steady as concerns about a potential
strike among unionised U.S. refinery workers kept in check
demand worries after bleak economic data from the world's top
oil consumer nation.
Crude for March delivery was up 17 cents to $41.61 a barrel
<CLc1> []
(Additional reporting by Aiko Hayashi in TOKYO; Editing by
Tomasz Janowski)
