By Rafael Nam
HONG KONG, March 20 (Reuters) - Gold prices slumped more
than 2 percent to their lowest in a month and oil dropped as
doubts about the global economy continued to unnerve commodity
asset classes that had soared to record highs as early as this
week.
Asian resource and mining stocks fell, while renewed credit
crisis fears also dragged down indexes across the region just
one day after investors had cheered hefty U.S. interest rate
cuts and resilient results from leading U.S. investment banks.
European shares were expected to fall, with major indexes
seen down around 1.6 percent to 2.1 percent.
But the dollar gained against the euro after some initial
volatility on the back of the decline in commodity prices,
though volumes were reduced as markets in Japan were closed for
a public holiday.
"We're seeing a return to reality with regard to the
situation in the U.S.," said Savanth Sebastian, equities
economist at CommSec in Australia.
"The trend in the U.S. remains the same, credit markets
remain tight and possible writedowns can continue."
Gold <XAU=> tumbled more than 2 percent to as low as
$920.30 an ounce, its lowest since Feb. 20., after prices had
already slumped 6 percent on Wednesday in its biggest one-day
percentage drop in nearly two years. Bullion last traded at
$936.60.
That marked a severe retreat from a record $1,030.80 an
ounce hit on Monday, though prices are still up some 12 percent
so far this year.
Other metal prices from platinum to copper to silver also
came under heavy pressure amid concerns that a U.S.-led
economic slowdown could undermine global demand.
"I think we will probably see further falls in commodity
prices," said analyst Cai Luoyi at China International Futures.
"It is obvious that investors who cut their holdings due to
concerns on the U.S. economy are not likely to build up long
positions again in the near term."
Oil prices extended the prior day's slump into Asian trade
as well, with U.S. crude futures <CLc1> down 38 cents to
$102.19 a barrel, retreating sharply from a record $111.80 hit
on Monday.
Commodity prices have soared this year as demand outpaced
supply, while a slumping dollar also lifted prices as it makes
purchases less expensive when done through other currencies.
STOCKS EXTEND SLUMP
The MSCI's measure of Asian stocks outside Japan
<.MIAPJ0000PUS> fell 1.9 percent by 0620 GMT.
Concerns about a financial credit crisis returned after
Merrill Lynch <MER.N> said on Wednesday it sued a U.S. bond
insurer to stop it from backing out of credit guarantees,
fuelling speculation the U.S. investment bank may need to take
further write-downs. []
Asian stocks have had a volatile week that started with
worries about more casualties following the fire sale of Bear
Stearns <BSC.N> to JPMorgan & Chase <JPM.N>.
But markets perked up mid-week following the U.S. Federal
Reserve's rate cut and better-than-expected results from
Goldman Sachs <GS.N> and Lehman Brothers <LEH.N>.
Shares in Australia <> and Hong Kong <> dropped
more than 3 percent each on Thursday as resource firms such as
BHP Billiton <BHP.AX>, the world's biggest miner, and
Petrochina <0857.HK>, the world's most valuable energy
producer, slumped.
Shares in Singapore <.FTSTI> edged lower, though markets in
China <> gained 1.5 percent, in a technical recovery from
recent sharp losses.
Taiwan shares <> gained 1.9 percent amid hopes of
better ties with China after the country elects a new president
on Saturday, while South Korean shares <> ended flat,
erasing earlier losses as the slumping won currency <KRW=>
lifted exporters.
The falls in commodity prices helped lift the dollar after
initial weakness earlier in the session, with the U.S .currency
reaching $1.5566 per euro <EUR=> up slightly from late U.S.
trade, and still off its recent record low against major
currencies.
