GLOBAL MARKETS-Asian markets hunker down, fear more bank pain

                                
 (Updates prices, adds China, European open, VIX)
                                
 By Tom Miles
                                
 HONG KONG, April 22 (Reuters) - Asian shares fell on
Tuesday as investors flinched at more bad news from the banking
sector while fears of fresh dollar weakness hurt exporters and
kept oil within sight of its latest record of nearly $118 a
barrel.
                                
 Major European markets also fell in early trading. London's
FTSE 100 <.FTSE> dropped 0.2 percent, the German DAX <.GDAXI>
slipped 0.4 percent and the French CAC 40 <.FCHI> was off 0.3
percent.
                                
 "Wall Street has been surprisingly resilient, but we don't
know if it will last, and we have a lot of U.S. and Japanese
earnings to get through," said Koichi Ogawa, chief portfolio
manager at Daiwa SB Investments.
                                
 "There are still a lot of question marks left."
                                
 Investors hoping that an end to the credit crisis might be
in sight were brought back to earth on Monday when Bank of
America Corp <BAC.N>, the top U.S. retail bank, showed a 77
percent drop in quarterly profit [ID:nN21410537] and regional
bank National City Corp <NCC.N> said it was raising $7 billion
in capital [ID:nN21424675].
                                
 More bad news from banks could be on the way after
Britain's Royal Bank of Scotland <RBS.L> announced a 12 billion
pound ($24 billion) rights issue to cover a potential 5.9
billion pound writedown. [ID:nL22463702] Other British banks
could follow suit.
                                
 "The whole stock market is twitchy, the financials in
particular," said Peter Vann, head of investment research at
Constellation Capital Management. "Some of the U.S. banks are
definitely going to have some large losses or a considerable
reduction in profits because of all the riskier activities."
                                
 Although the latest bank woes unsettled investors, the CBOE
Volatility Index <.VIX>, a barometer of jitters on the U.S.
equity market, showed no new signs of panic. It barely rose,
ending Monday with a reading of 20.5, its second lowest close
this year.
                                
 Japan's Nikkei stock average <.N225> closed down 1.1
percent, led lower by blue chip exporters such as Honda Motor
Co Ltd <7267.T> as a stronger yen prompted investors to lock in
profits after the market climbed for five days.
                                
 Stocks across the rest of Asia, measured by MSCI's index
<.MIAPJ0000PUS>, fell 0.65 percent.
                                
 China's benchmark Shanghai Composite Index <.SSEC> touched
a 13-month low, led by steel and metal-related stocks, as
investors were disappointed by weak government measures to
bolster the slumping market. The index has fallen by half since
last October.
                                
 In Seoul, shares in some Samsung Group units fell after
chairman Lee Kun-hee, indicted last week for tax evasion, said
he was quitting his post at South Korea's largest conglomerate.
                                
 DOLLAR STRUGGLES
                                
 The continued worries about the U.S. economy and fears of
another salvo of bank woes kept the dollar under pressure
against the yen <JPY=> and the euro <EUR=>. The slide in Asian
stocks prompted investors to trim risky yen carry trades, in
which players use the low-yielding Japanese currency to finance
purchases of assets offering higher returns elsewhere.
                                
 "Weaker share prices sparked yen buy-backs, while some
investors also booked profits on the dollar's recent rise
against the yen," said a trader at a Japanese trust bank.
                                
 The euro also gained after European Central Bank Governing
Council member Klaus Liebscher said there was no reason for
pessimism on eurozone growth, suggesting the ECB would keep
rates at a six-year high of 4 percent for a while.
[ID:nL21705942]
                                
 "It's only a matter of time before the euro hits the key
$1.6 level as investors believe there are fewer risks in buying
the euro," said Hiroshi Yoshida, a trader at Shinkin Central
Bank.
                                
 The euro was trading at $1.5875 <EUR=>, not far from last
week's record high of $1.5985, while the dollar was at 103.06
yen <JPY=>, having hit a seven-week peak of 104.66 yen last
week.
                                
 The weak dollar has helped prices for commodities such as
oil hit record highs this year.
                                
 But U.S. crude oil prices <CLc1> needed little currency
support on Tuesday, remaining close to a record high of $117.83
a barrel, hit on Monday after rebel attacks cut Nigerian
supplies and a Scottish refinery strike threatened North Sea
production.
                                
 On the demand side, crude imports to China, the No. 2 oil
user, surged a quarter from a year ago to 4.07 million barrels
per day in March, far above previous records, customs data
showed.
                                
 U.S. light crude was 0.2 percent lower at $117.25 a
barrel.
 (Additional reporting by Geraldine Chua in SYDNEY, Rika Otsuka
in SYDNEY, Editing by Sonya Hepinstall)