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* Focus shifts to earnings outlook amid global slowdown
* Risk takes back seat again as yen, Treasuries rise
* U.S. appears in recession - Fed's Yellen
By Kevin Plumberg
HONG KONG, Oct 15 (Reuters) - Most Asian stock markets fell
1-3 percent while gold rose on Wednesday on investor worries of
lower corporate earnings in a weakening global economy, even as
money markets continued to heal gradually.
Major European share markets were expected to open as much
as 2 percent down , according to financial bookmakers, after
the FTSEurofirst 300 index <> rose nearly 14 percent in
the last two days.
Oil prices were not far from a 12-month low hit on Friday
while the yen and U.S. Treasuries climbed, reflecting fears the
damage that the financial crisis inflicted on the global
economy is still working its way through the system.
Quarterly reports have begun to trickle in, with JPMorgan
Chase & Co <JPM.N> and Merrill Lynch <MER.N> set to post their
results this week. Investors will be focused on the outlook and
whether most expectations for a rebound in 2009 will have to be
reined in.
"While the financial system crisis appears to be heading in
a positive direction, the economy appears to be increasingly
bad, and this is raising worries about company earnings. We
still don't know how much these might be hit," said Hiroaki
Osakabe, a fund manager at Chibagin Asset Management in Tokyo.
The MSCI index of Asia-Pacific stocks outside of Japan
<.MIAPJ0000PUS> fell 2.2 percent and is down 12.5 percent so
far in October.
Hong Kong's Hang Seng index <> slid 2.9 percent,
snapping a two-day 14 percent rally. Shares of HSBC <0005.HK>
and China Construction Bank <0939.HK>, one of the country's
largest banks, weighed the most on the index.
Japan's Nikkei share average <> rallied to close up 1
percent after trading lower for most of the session. The index
on Tuesday posted a record rise of 14.2 percent.
Earnings estimates have come way down for 2008, with some
markets even set for overall losses in Asia. However,
expectations for 2009 are still for growth well into the double
digits in places like Hong Kong, Singapore and Taiwan,
according to international estimates tracker IBES.
The upcoming results season could make analysts revisit
those projections.
CREDIT PRESSURES EASE, RECESSION FEARS RISE
This week the biggest and most direct effort yet by
policymakers around the world to thaw short-term lending
markets has had some success, particularly in slowing plunging
global equity markets. Money market pressures were easing
slowly, tightening credit spreads, and the risk of a
system-wide failure has passed for now.
Governments around the world have ushered in a new,
uncertain era in banking, having pledged about $3.2 trillion to
among other things guarantee bank deposits, back interbank
borrowing and recapitalise financial institutions.
[]
Many analysts were still working out the implications of
such a radical change in the world's financial structure and
what it might mean for markets.
"The optimistic scenario is that credit markets gradually
recover with equities generating a virtuous feedback loop. With
spreads so wide the feedback loop could go on for a while,"
said Adrian Mowat, JPMorgan's emerging markets and Asia-Pacific
equity strategist.
However, the U.S., euro zone and Japanese economies are all
widely expected to slip into recessions, threatening growth in
emerging markets.
San Francisco Federal Reserve President Janet Yellen warned
in a speech the U.S. economy appeared to be in a recession and
that job creation could struggle for months or even years. The
futures market reflects a 92 percent chance the Fed will reduce
interest rates to 1.25 percent from 1.5 percent this month.
"As a result of the growing economic/earnings pessimism
risk trades could come back to the fore more quickly than many
anticipate," strategists with Calyon in Hong Kong said in a
note.
"The U.S. dollar may not benefit as much as it has done
over recent weeks as it appears that the bulk of
deleveraging-related repatriation flows have been undertaken,
as well as the fact that market pessimism is once again being
directed towards the U.S."
The yen rose broadly on renewed unwillingness among
investors to take risks with the global economy slowing
sharply.
The euro fell 0.8 percent against the yen to 138.07
<EURJPY=R> and dropped 0.2 percent against the dollar to
$1.3589 <EUR=>. The U.S. dollar fell 0.6 percent from late New
York trade to 101.60 yen <JPY=>.
U.S. Treasury debt prices recovered after falling sharply
on Tuesday on worries about increased government borrowing
needs as a result of bank rescue packages.
The benchmark 10-year yield <US10YT=RR>, which moves in the
opposite direction of the price, slid to 4.03 percent after
hitting a three-month high of 4.09 percent on Tuesday.
U.S. crude oil futures <CLc1> were down 0.3 percent to
$78.44 a barrel after a 3 percent decline overnight on
expectations for slowing demand.
Gold rose 1.3 percent <XAU=> in the spot market to $846.10
an ounce and is up 7.6 percent from a month ago.
(For more on the crisis, click [])
(Additional reporting by Elaine Lies in TOKYO; Editing by
Sanjeev Miglani)
