* Asia stocks edge up, helped by shares of exporters
* MSCI Asia index set for biggest weekly drop in 10 months
* Shares of shippers hit on record drop in Baltic dry
index
(Recasts, updates prices with close of Japanese stock market,
adds European outlook)
By Kevin Plumberg
HONG KONG, June 13 (Reuters) - Asian stocks inched up on
Friday as exporters gained, but inflation fears that also hit
bonds kept the broad index on track for its biggest weekly
decline since the global credit crisis erupted 10 months ago.
European stocks <> were expected to open lower, with
higher costs the main worry for investors ahead of the latest
data on U.S. consumer prices due later in the day.
Concerns about a pullback in demand for raw materials from
big consumers such as China knocked down shares of shipping
companies, especially after a key gauge of seaborne trade in
dry commodities <.BADI> had its biggest drop ever on Thursday.
Government bonds around the world continue to be pummelled
by expectations that central banks are more concerned about the
inflationary effects of high oil prices than sluggish economic
growth. The benchmark yield on the 10-year Japanese government
bond rose to the highest since July 2007.
Oil prices were steady at $136.61 a barrel <CLc1>, slightly
below an all-time record of $139.12 hit last week.
"Overriding macroeconomic factors remain grim, with oil's
persistent strength and inflation pressure amid a global
economic slowdown," said Bae Sung-young, market analyst with
Hyundai Securities in Seoul.
Japan's Nikkei share average <> ended up 0.6 percent
but posted its largest weekly drop in three months.
A rebound in the U.S. dollar in the last three months has
spurred demand for shares of high-profile exporters like Honda
Motor Co Ltd <7267.T> and Canon Inc <7751.T>.
South Korea's KOSPI <> clawed 0.2 percent higher,
boosted by technology heavyweight Samsung Electronics
<005930.KS>. However, the index chalked up its biggest weekly
decline of 2008, down 4.9 percent.
Australia's benchmark equity index climbed 0.9 percent,
helped by resource-related shares <>. Investment firm
Babcock & Brown Ltd <BNB.AX> lost a third of its value as
concerns mounted about the company's debt and ability to raise
funds, taking losses to over 50 percent in two days.
[]
The MSCI index of Asian equities <.MIAS00000PUS> was down
6.2 percent this week, the largest decline since the week of
Aug. 19. The global stocks index <.MIWD00000PUS> was largely
unchanged on the day, having fallen for five straight days to
the lowest in two months.
Freight companies such as Mitsui OSK Lines Ltd <9104.T> in
Japan and China COSCO <1919.HK>, China'a largest shipping firm,
were under pressure after the Baltic Exchange's dry freight
index posted its biggest single-day percentage decline ever.
BEWARE BONDS
Government bonds, particularly in Japan, have been roiled
in the past few weeks due to surprisingly blunt
inflation-fighting rhetoric from central bankers in Europe and
the United States that has been seen as opening the way for a
potential Bank of Japan rate rise later this year.
"Almost every piece of economic data -- from wholesale
prices in Japan, to producer prices in the UK and CPI in China
-- has served to reaffirm fears that inflation is out of
control," said analysts with State Street Global Markets in a
research note.
"Frankly, there is no good reason to buy government bonds
in this environment."
The benchmark 10-year JGB yield rose as much as 8.5 basis
points to 1.880 percent, an 11-month high <JP10YTN=JBTC>.
Pointed comments about the risk of higher inflation from
Fed Chairman Ben Bernanke in the last two weeks have weighed on
U.S. Treasuries. The yield on the 2-year note <US2YT=RR>, the
maturity most sensitive to shifts in monetary policy, rose to
3.11 percent, the highest level since early January.
Several central banks in the region, including those in
China, India, Indonesia and the Philippines, have already begun
to tighten monetary policy to fight upward pressure on prices.
The dollar was steady against the yen at 107.80 yen <JPY=>
close to a nearly four-month high of 108.08 yen. The euro was
nearly unchanged against the dollar at $1.5450 <EUR=>, ahead of
a Group of Eight finance ministers meeting which begins later
on Friday in Japan.
(Additional reporting by Park Jung-youn in Seoul; Editing by
Michael Urquhart)
