* Nikkei drops to 16-mth low on no relief from strong yen
* Yen gains pause on report Japan mulling solo intervention
* Dismal U.S. home sales stoke double-dip recession fears
* Commodity, tech sectors lead broad Asia equity decline
(Repeats to more subscribers)
By Kevin Plumberg
TAIPEI, Aug 25 (Reuters) - Asian stocks fell on Wednesday,
as investors moved out of risky sectors after a spate of
worrying U.S. economic data, while the yen retreated from
15-year highs on views Tokyo may take steps to cap the
currency's strength.
European stocks opened slightly lower, extending the
previous session's sharp losses on mounting economic fears and
after Standard & Poor's cut Ireland's credit ratings.
[]
Even if Japan's government acts alone to halt yen strength,
dealers were sceptical it could reverse the growing
unwillingness among investors to take risks that has driven the
yen's 10 percent rise so far this year to a 15-year high
against the dollar. []
"The consensus feeling is that intervention might not have
much of an impact, but investors keep on expecting something --
and all we have is talk," said Koichi Ogawa, chief portfolio
manager at Daiwa SB Investments in Tokyo.
Japan's Nikkei share average fell 1.7 percent <> to
the lowest close since April 2009 on disappointment over the
lack of policy action by authorities to rein in the strong yen.
[]
The yen may get another boost and equities may come under
fire if U.S. durable goods orders and new home sales for July
due later fall short of forecasts. An unexpected plunge in
existing home sales on Tuesday amplified fears the U.S. economy
could be sliding into a prolonged period of stagnation or even
recession.
The dollar edged up 0.1 percent against the yen to 84.25
yen <JPY=>. Caution on the yen initially stemmed from a Nikkei
business daily report saying Japan's Ministry of Finance may
consider unilateral yen-selling intervention without the
blessing of other advanced economies if speculators drive up
the currency. []
Japanese officials voiced their concerns about yen strength
but did not take any action, causing the yen to cut its losses
on the day. The dollar hit a 15-year low of 83.58 yen on
trading platform EBS on Tuesday.
"The dollar went to 83 yen, so the chance of intervention
has increased, but it would take more than intervention," said
Kiichi Murashima, economist at Citigroup Global Markets in
Tokyo.
"It has to be coupled with easing by the BOJ to have any
impact," he said, referring to potential monetary policy action
by the Bank of Japan.
The BOJ, like many other major central banks, has fewer
options left to deal with economic sluggishness and the menace
of deflation after cutting rates effectively to zero.
Shares of Japanese exporters such as Honda Motor Co
<7267.T>, which were down 3.1 percent, have been stung by the
rising yen. The currency's strength has blown past many
exporters' assumptions for the year, threatening to crimp
profits at a time when global demand appears to be cooling.
The MSCI index of Asia Pacific stocks outside Japan fell
1.1 percent <.MIAPJ0000PUS> to a 1-month low, led by sectors
most sensitive to business cycles such as raw materials and
technology.
However, the index, which is down 4.3 percent on the year,
has held up better than the all-country world index, which has
fallen 7.2 percent <.MIWD00000PUS>.
Indeed, southeast Asian markets have been outperforming the
region based on economic resilience. Indonesia's benchmark
index <>, the best performing emerging Asian stock market
this year, was up 0.1 percent, near a record high touched on
Tuesday.
RISING YEN TREND
The euro rose 0.1 percent to $1.2640 <EUR=>, mostly
ignoring Standard & Poor's sovereign credit rating downgrade of
Ireland. []
The possibility of additional easing by the Federal Reserve
has hurt the dollar's attractiveness, but persistent concerns
about Europe's fiscal health have prevented investors from
running to the euro en masse.
As a result, many investors to the dismay of Japanese
officials have latched on to the rising yen trend. Finance
Minister Yoshihiko Noda told reporters on Wednesday that recent
yen moves were one-sided and Tokyo will respond appropriately
when necessary. []
Government bonds were the haven of choice for investors
cutting their equities exposure, and they are also much more
profitable so far this year.
Citi's world government bond total return index is up 3.6
percent in 2010, while the MSCI world stocks total return index
is down 6 percent.
Japanese government bonds extended gains on Wednesday,
pushing down the benchmark 10-year yield to a seven-year low
while three-year South Korean bond futures <KTBc1> rose to the
highest since March 2009, when the global equity rally that is
struggling to stay alive began. []
(Additional reporting by Leika Kihara, Tetsushi Kajimoto and
Elaine Lies in TOKYO; Editing by Kazunori Takada)
