* Fed's Bernanke signals willingness to cut rates
* Yen edges up as global equities tumble to 4-year low
* U.S. yield curve continues to steepen sharply
By Kevin Plumberg
HONG KONG, Oct 8 (Reuters) - Asian stocks fell about 4
percent, down for a fifth consecutive day, and government bond
prices rose on Wednesday as fears of a looming global recession
grew with no sign of a coordinated response or an end to the
worsening financial meltdown.
The yen climbed as investors clung to anything resembling
stability after Federal Reserve Chairman Ben Bernanke warned
turmoil in markets could cause U.S. economic activity to be
subdued into 2009 and signalled a readiness to cut interest
rates. []
"The deteriorating outlook for the economy and the
deepening financial crisis are pushing fears to their limit,"
said Mitsushige Akino, chief fund manager at Ichiyoshi
Investment Management in Japan.
Tokyo's Nikkei share average <> dropped 4.5 percent,
hitting a fresh 5-year low, taking losses for the past five
days to 15 percent.
Shares of Toyota Motor Corp <7203.T> fell more than 5
percent after a report the car maker's annual operating profit
will likely fall around 40 percent in the year to next March.
[]
Australia's S&P/ASX 200 index slid 3.5 percent, a day after
rallying on a much larger-than-expected interest rate cut by
the country's central bank.
The MSCI Asia-Pacific index of stocks outside of Japan
<..MIAPJ0000PUS> was down 4.4 percent to a near 3-year low. The
index has fallen a staggering 25 percent in a month and 46
percent so far this year, underperforming the MSCI all-country
world index <.MIWD00000PUS>, which has fallen 36 percent
year-to-date.
Hong Kong's Hang Seng index <> fell 5.4 percent to a
27-month low after a market holiday on Tuesday.
Bernanke's sobering and candid tone in a speech on Tuesday
about the likelihood of interest rate cuts came days after
European Central Bank President Jean-Claude Trichet prepared
markets for easier monetary policy.
However, with the upcoming Group of Seven rich nations
meeting on Friday, investors have begun to anticipate broader
action to snuff out what has become a global calamity.
Not one effort by a government -- including a series of
bank rescues, the establishment of a $700 billion U.S. rescue
fund, emergency measures by European governments and massive
injections of funds by central banks around the world -- has so
far been able to stop the increasing dysfunction of the
financial system or keep the global economy from a potential
recession.
The yen has emerged as clear favourite among investors amid
soaring market volatility.
However, UBS recommended bets the U.S. dollar would
strengthen against the yen ahead of possible coordinated action
among policymakers.
"The market has reasons to respond positively to efforts
from officials in Europe and the U.S. Concerted efforts may
soon reach a critical level in our view, helping investor's
sentiment, rendering support to dollar/yen," UBS strategists
said in a note.
The dollar was little changed from U.S. trade at 101.45 yen
<JPY=>, holding above a six-month low of 100.22 yen struck on
trading platform EBS earlier in the week.
The euro dipped 0.1 percent to 137.85 yen <EURJPY=R>,
holding above a three-year low of 135.05 yen also hit this
week. Both the Australian <AUDJPY=R> and New Zealand dollars
<NZDJPY=R> fell about 1 percent against the yen.
Japanese 10-year government bond futures <2JGBv1> rallied a
full point to 139.30, having risen for three of the last four
days.
U.S. Treasury debt prices ticked higher, pushing yields a
bit lower. The benchmark 10-year yield <US10YT=RR> slipped to
3.49 percent from 3.51 percent late in New York on Friday.
Like other developed bond markets, the difference of the
10-year yield over the 2-year yield -- also called the yield
curve -- has been growing sharply over the last month as
dealers anticipated a cut in the Federal Reserve's target rate.
In the last month, the U.S. yield curve has steepened by 64
basis points to the most since June 2004.
(Additional reporting by Aiko Hayashi in TOKYO; Editing by
Lincoln Feast)
