RPT-GLOBAL MARKETS-Finance sector fears hit Japan stocks, yen up

                                
 * Worries persist over financial sector losses
                                
 * Tech and auto shares a bright spot; yen gains for 2nd day
                                
 * IMF sees deepest global recession since World War Two
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 By Dan Burns
                                
 HONG KONG, April 23 (Reuters) - Japanese shares fell on
Thursday as worries about the health of the global financial
sector flared again after a larger-than-expected loss from
Morgan Stanley and a report that top Japanese broker Nomura had
also fallen deeply into the red.
                                
 Government bonds, gold and the yen all firmed as investors
shied from risk amid a weakening outlook for the global
economy.
                                
 The International Monetary Fund slashed its forecasts for
every major country and predicted worldwide gross domestic
product would contract by 1.3 percent this year, marking the
deepest post-World War Two recession by far. [ID:nN21500818]
                                
 Nomura Holdings <8604.T> fell about 4 percent after the
Nikkei business daily reported the broker may post a loss of
more than $7 billion for the year ended in March
[ID:nBNG499291].
                                
 The report further dampened investor sentiment toward the
financial sector after U.S. securities firm Morgan Stanley
<MS.N> posted a larger-than-expected quarterly loss, helping
drag the U.S. benchmark Standard & Poor's 500 <.SPX> lower
overnight [ID:nN22534760].
                                
 Investors have also grown increasingly wary about
financials ahead of the release of U.S. bank stress tests on
May 4. The tests were designed to see how the country's largest
banks would fare if the U.S. recession proved unexpectedly
severe.
                                
 Within equities, however, pockets of strength could be
found in technology and auto shares. Tech stocks were supported
by buoyant earnings from iPod maker Apple Inc <AAPL.O>
[nN21504807].
                                
 In Japan, Pioneer <6773.T> jumped more than 6 percent after
a company source said Honda Motor Co <7267.T> was finalising
plans for a big investment in the electronics maker
[ID:TKF104346]. Honda rose 1.7 percent.
                                
 "The market has gotten very sensitive in the short-term to
individual company news, buying on good news and selling on
bad," said Hiroaki Osakabe, a fund manager at Chibagin Asset
Management. "Today, it's really half and half -- cars and techs
up, financials and trading houses down."
                                
 Japan's Nikkei <.N225> fell about 0.5 percent and the
broader Topix <.TOPX> edged down by 0.3 percent. Taiwan shares
were down by 0.3 percent as financial shares slid and mainland
China shares were off 1 percent in early Shanghai trade, with
bank lending a central concern.
                                
 China's central bank has told the country's leading banks
to extend loans at a "steadier and more rational" pace after a
surge in credit in the first quarter, Caijing magazine
reported.
                                
 In the first 20 days of April the amount of outstanding
loans issued by most big commercial banks had declined, which
would signal an abrupt turnaround from the lending spree since
the start of the year, the report said. [ID:nPEK202520]
                                
 The MSCI index of Asia Pacific shares excluding Japan
<.MIAPJ0000PUS> firmed slightly.
                                
 Hong Kong's Hang Seng index <.HSI> opened higher but a big
drop in PCCW <0008.HK> shares drew the most attention. The
telecommunications firm fell more than 12 percent in early
trading after a Hong Kong appeals court struck down a proposal
to take the company private [ID:nHKG148241].
                                
 South Korean shares <.KS11> rose slightly but banks
underperformed, while Australia's benchmark index <.AXJO> added
1 percent on hopes of more merger activity in the beer and
beverage sector.
                                
 S&P 500 futures <SPc1> were down 0.3 percent, indicating a
lower open for Wall Street.
                                
 YEN, BONDS, GOLD FIRMER
                                
 The dollar fell against the yen <JPY=> for a second day as
banking sector fears re-emerged, shedding 0.25 percent to 97.75
yen. The dollar touched its weakest level of the month on
Wednesday, just about two weeks after hitting a six-month high
of 101.45.
                                
 The euro <EUR=> was weaker against the yen as well,
dropping to 126.92 yen from 127.38 late on Wednesday.
                                
 Uncertainty about the European Central Bank's next monetary
policy move has kept selling pressure on the euro this month.
                                
 U.S. Treasuries were up modestly with stock futures
slipping.
                                
 The yield on the benchmark 10-year Treasury note
<US10YT=RR> eased to 2.93 percent from 2.94 percent late in New
York. The U.S. yield curve continued its steepening trend with
the spread between 10-year notes and 2-year notes climbing
above 197 basis points, the widest gap in 10 days.
                                
 Japanese bond futures were also up, with the 10-year
contract <2JGBv1> expiring in June rising to 137.35, its
highest since April 3.
                                
 Spot gold <XAU=> was up about 1 percent at $892.30 an ounce
from $889.15 late in New York.
                                
 U.S. crude prices <CLc1> fell 0.8 percent, or 39 cents, to
$48.47 a barrel on worries that the weak global economy will
continue to undermine energy demand.
 (Editing by Kim Coghill)