* Drop in U.S. consumer confidence rattles investors
* Tokyo leads Asian stocks lower after Wall Street slide
* Investors eye Fed chief's testimony for policy signals
* Yen holds gains as investors shun riskier assets
By Kevin Yao
SINGAPORE, Feb 24 (Reuters) - Asia shares fell on Wednesday
as surprise declines in U.S. consumer confidence and German
business sentiment fueled fears about the strength of the
global economic recovery and boosted the safe-haven yen.
U.S. stocks suffered their biggest one-day drop in nearly
three weeks after data showed U.S. consumer confidence in
February slumped to a 10-month low, while German business
confidence dropped for the first time in almost a year. []
But European shares were likely to edge higher after sharp
falls in the previous session, with financial spreadbetters
expecting Germany's DAX <> to rise 22 to 24 points and
France's CAC <> to open 6 to 16 points higher. Britain's
FTSE <> was seen slightly lower to flat.
Traders were also eagerly awaiting testimony by Federal
Reserve chief Ben Bernanke to Congress later on Wednesday for
fresh policy signals, following a surprise rise in its discount
rate last week that spooked investors. []
Stock markets have been volatile so far in 2010, with Asia
retreating about 5 percent, amid worries that the global
economic recovery is not strong enough yet for central banks to
start withdrawing emergency stimulus measures put in place
during the financial crisis.
"The market is now in a place where investors are closely
watching economic indicators for clues on the future direction,
with earnings reports having run their course. It tends to
react nervously to each set of data," said Yumi Nishimura,
deputy general manager at Daiwa Securities Capital Markets.
Japan's Nikkei <> fell 1.5 percent on Wednesday, while
the MSCI index of Asian shares excluding Japan <.MIAPJ0000PUS>
shed 1.1 percent.
South Korean stocks <> fell 1 percent, with shares in
Hyundai Motor Co <005380.KS> sliding 2.6 percent after reports
that it will recall about 46,000 units of its Sonata sedan in
the domestic market and another 1,300 in the United States.
[]
Adding to investor skittishness in Asia, China implemented
fresh measures to clamp down on excessive lending which it
fears could create destabilising asset bubbles.
China's banking regulator has told some lenders to restrict
new loans to local governments' financing arms to ward off
potential risks of default, state media reported, the latest
step by Beijing to rein in galloping credit expansion.
[]
Shanghai stocks fell in early trade but clawed back up 1.4
percent by mid-afternoon as traders looked for bargains among
beaten-down small cap stocks, while Hong Kong's Hang Seng index
<> succumbed to the downdraft from Wall Street and fell 0.5
percent.
Though Asia's recovery has been strong in recent months,
led by China, economic data in the United States and Europe
have painted a more mixed picture, with many economists
predicting a slow and painful recovery in the West.
U.S. proposals for more stringent regulations on markets
and banks have also unnerved investors. U.S. securities
regulators are considering new short-sale restrictions with no
exemptions for market makers, people familiar with the
regulators' plans said on Tuesday. []
"If you have a blanket restriction on short selling... it
would have the effect of discouraging market making, so you
would end up with a lower level of liquidity than would
otherwise be the case, which in turn can result in a more
volatile market," said Shane Oliver, head of investment
strategy at AMP Capital Investors in Sydney
YEN HOLDS GAINS
The yen, widely seen as a haven in times of market turmoil,
held on to hefty gains <JPY=> made on Tuesday while the dollar
stayed firm against the euro <EUR=> as investors sought to
limit their exposure to riskier assets.
The dollar was near 90.20 yen after a nearly 1 percent drop
on Tuesday. The dollar index against a basket of other major
currencies <.DXY> was little changed.
The euro slid 0.7 percent on Tuesday, pressured by the
unexpected drop in Germany's much-watched Ifo business climate
index as harsh winter weather weighed on the construction and
retail sectors. The data hinted Europe's largest economy could
slide back into contraction in the first quarter.
[]
And a Fitch Ratings credit downgrade of Greece's four
largest banks reminded investors of the fiscal problems in
Athens and the lack of clarity from the euro zone on how it
might aid one of its members.
Gold <XAU=> edged up to $1,106 an ounce after falling 1
percent the previous day as the dollar firmed and other
commodities dropped followed the worrying U.S. consumer
confidence data, which triggered worries about demand.
Many economists believe there can not be a strong,
sustainable global recovery until U.S. shoppers start buying
again and the housing market stabilises.
Oil prices <CLc1> rose 30 cents to $79.16 a barrel after
data from the American Petroleum Institute showed crude
inventories in the world's biggest oil consumer nation fell.
[] (Additional reporting by Aiko Hayashi in TOKYO;
Editing by Kim Coghill)
