* Focus on Lehman results due ahead of U.S. market open
* Oil above $104 on effective OPEC output cut
* Fannie, Freddie relief effect wears off
By Kevin Plumberg and Vidya Ranganathan
HONG KONG/SINGAPORE, Sept 10 (Reuters) - Asian stocks fell
about 1 percent and U.S. Treasuries dipped on Wednesday on
fears about Lehman Brothers' ability to raise capital,
demonstrating Washington's bailout of Fannie Mae and Freddie
Mac this week had not fixed the credit crisis.
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 13-month high against
the euro <EUR=> on Tuesday.
While the U.S. government bailout of its top mortgage
finance companies on Sunday 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 bank, 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."
The Wall Street Journal reported Lehman was in talks with
investment firm Blackrock Inc <BLK.N> to sell a package of
British residential real estate assets and was looking at
spinning off some commercial property assets. []
Tokyo's Nikkei share average fell 0.8 percent <> after
briefly touching a six-month intraday low earlier.
Australia's benchmark S&P/ASX 200 index <> was down
nearly 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 1.5 percent,
with shares of the world's largest cellular operator China
Mobile <0941.HK> the biggest drag.
Worries about the prospect of another U.S. bailout for
Lehman Brothers dragged U.S. Treasuries, with 10-year yields
rising almost 6 basis points. Japanese bonds initially gained,
but the September 10-year JGB futures soon was trading nearly
flat at 136.94 <2JGBv1>.
The euro was also listless ahead of the Lehman results,
trading nearly steady at $1.4130 <EUR=>, 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 desire to
avoid 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. Even the
excitement over the Fannie and Freddie bailout seemed to have
all but evaporated.
"The bail-out honeymoon already appears to be over. Risk
aversion was back with a vengeance...," Rabobank said in a note
to clients.
V. Anantha Nageswaran, a strategist with Julius Baer, said
the bailout and the rally it spurred in risk assets were like
"comic interludes" in a long-drawn deleveraging process.
"A new risk cropped up and they addressed that new risk.
That doesn't mean the underlying risk went away, which is that
the shrinking of household and financial sector balance sheets
is a multi-year process," Nageswaran said.
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
Lincoln Feast)
