* Asia shares dip as Oct heads for worst month on record
* Nikkei slides after smaller-than-expected rate cut
* Commodities routed on worries over global demand
(Updates with European outlook, BOJ decision)
By Rafael Nam
HONG KONG, Oct 31 (Reuters) - Asian shares dipped on Friday
and headed for their biggest ever monthly fall, but optimism
that a new round of interest rate cuts may revive a comatose
global economy helped many indexes keep their largest weekly
gains on record.
The Bank of Japan cut interest rates to 0.3 percent on
Friday, its first rate cut it seven years, but the move was
smaller than expected and came after a split vote. The yen rose
while Nikkei average <> extended losses to close down 5
percent after the decision. []
European stocks were set to open as much as 1.5 percent
higher, according to financial bookmakers, helped by optimism
about the cushioning impact of recent rate cuts.
Oil prices dropped nearly $2 a barrel after data on
Thursday showed the U.S. economy suffered its sharpest
contraction in seven years in the third quarter, as consumers
cut spending and businesses reduced investment. []
And prices for base metals continued to slide, with
Shanghai copper down a record 41 percent this month alone, on
persistent concerns the global economy faces a potentially
severe and long recession.
Policy makers have responded by cutting rates and injecting
liquidity, as well as adopting unprecedented rescues of their
banking sectors. After weeks of erosion in investor sentiment,
some analysts are now wondering whether the worst might now be
behind, at least for now.
"There's a bit of a tug-of-war going on, since investor
sentiment has changed slightly on the sense the market may have
bottomed out for now, and people are willing to buy," said
Tomomi Yamashita, a fund manager at Shinkin Asset Management.
WEEKLY GAIN, MONTHLY FALL
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> fell 0.6 percent by 0640 GMT.
The index is up 13 percent this week, its biggest weekly
gain on record but is still down some 24 percent for the month
and about 54 percent for the year.
Japan's Nikkei hit a 26-year low this week but rallied as
much as 30 percent in a three-day surge to Thursday.
Shares in South Korea <> gained 2.6 percent, while
Taiwan <> surged 4 percent, and India added 7 percent.
Markets in Singapore <.FTSTI> and Australia <> posted
smaller gains, while shares in Hong Kong <> and Shanghai
<> fell amid profit-taking and concerns over earnings.
The focus of policy makers worldwide has shifted from
stabilising credit markets and providing funds to banks, to
attempts at reviving their economies by cutting interest rates.
UNCERTAINTY REMAINS
But plenty of apprehension remained after the intensely
volatile period in global markets following the collapse of
Lehman Brothers in mid-September.
The yen extended its gains against the dollar on Friday
after the Bank of Japan's action. The currency has been
supported as investors unwind investments in risky assets that
had been funded by borrowing the low-yielding yen.
The yen gained to around 97 yen <JPY=> after the decision
was announced, up from around 98.40 yen.
Commodities, which are sensitive to global demand,
continued to be routed. U.S. crude futures <CLc1> were headed
to their worst monthly loss ever after slumping $1.7 to $64.24
a barrel on Friday, less than half the record near $150 it had
hit in July.
Platinum <XPT=> dropped to $770 an ounce, down from the
notional New York close of $817. The metal had hit a life-time
high of $2,290 in March.
(Editing by Lincoln Feast)
