* Asia stocks down 2 to 3 pct, losses biggest in materials
* Yen hits three-week high vs dollar, oil below $67
* Japanese government bond futures up 8th straight day
* VIX gaps higher again overnight
(Repeats to additional subscribers)
By Kevin Plumberg
HONG KONG, June 23 (Reuters) - Asian stocks tumbled on
Tuesday, as confidence in the recovery ebbed and falling
commodity prices and a sharp drop on Wall Street spooked
investors into taking profits and buying the yen for safety.
Major European stock market futures < STXc1> pointed to a
lower open and U.S. S&P 500 futures <SPc1> were down 0.2
percent, with selling based on scepticism about recovery
prospects spreading.
Questions about the extent of Chinese restocking of various
commodities weighed on base metals prices and oil overnight,
with U.S. crude dropping below $67 a barrel, down $6 from an
eight-month high reached on June 11.
The U.S. recession was widely viewed as ending sometime in
the second half of 2009, but that has already been priced in,
leading investors to trim positions into the end of the first
half and wait for further confirmation.
"Optimism over the prospects of economic recovery have
already been factored into equity and commodity markets, so now
people are standing back and reassessing. Oil will probably
track sideways -- probably between $65 and $70 -- over the next
week," said Ben Westmore, commodities analyst with National
Australia Bank in Australia.
The rush to safety near the end of the quarter propelled
Japanese government bonds, with the yield on 10-year bonds at a
one-month low.
Big liquid markets were sitting targets for investors
looking to cut down their exposure to risk.
Japan's Nikkei share average fell 2.8 percent <>, with
buying limited to some companies which are seen being less
affected by the global economy, such as those in the
pharmaceuticals and food industries.
The MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> dropped 3.3 percent, falling to the lowest in
about a month. The index has declined for six of the last seven
trading days.
In the last 20 days, the index has slipped 0.4 percent,
compared with a decline of 2.5 percent on the all-country world
index <.MIWD00000PUS>. The premium that investors had placed on
Asia's growth prospects was being whittled away.
Hong Kong's Hang Seng index <> slid 2.3 percent. Index
heavyweights HSBC <0005.HK> and China Mobile <0941.HK> were the
biggest drags.
The S&P 500 index of U.S. stocks <.SPX> on Monday posted
its biggest one-day loss in two months, closing below its
200-day moving average for the first time in 15 days.
VOLATILITY POPS
Though companies will likely keep refilling inventories of
materials, prospects for final demand for products are still
highly uncertain.
As a result, copper for three-month delivery on the London
Metal Exchange <MCU3> slipped 0.3 percent to $4,745 a tonne
after dropping 5 percent on Monday. Year-to-date copper was
still up 53 percent.
U.S. oil for August delivery was down 1.4 percent to $66.56
a barrel <CLc1>, while Brent crude was down 1.3 percent to
$66.11 <LCOc1>.
After the Chicago Board Options Exchange volatility index,
better known as the VIX <.VIX> gapped higher for the second
time in June last night, knee-jerk demand for yen increased.
The U.S. dollar dropped to the lowest since June 1, at
95.03 yen <JPY=>, down 1 percent. The Australian dollar was
down 1.8 percent to 74.01 yen <AUDJPY=R>.
Government bonds rose slightly, with downward pressure on
global equities sending investors to relative safety. Still,
with a record $104 billion in U.S. Treasury auctions this week,
risks of holding U.S. government debt were higher than usual.
The benchmark yield on the 10-year Treasury note
<US10YT=RR> edged down to 3.67 percent from 3.70 percent late
on Monday and off 33 basis points from an eight-month high
reached on June 11.
The 10-year Japanese government bond future rose 0.44 point
<2JGBv1>, up for an eighth consecutive session, while the cash
yield <JP10YTN=JBTC> dropped 5 basis points to the lowest since
May 18 at 1.405 percent.
Some investors who missed some or all of the big rebound in
global equities that began on March 9 and eventually dragged up
commodity prices may be looking for an entry point now. As they
move out of cash and buy cheapened assets, the late comers may
limit the move lower in risky securities.
"A lot of institutional money remains on the sidelines and
may be put to work in case of market declines, limiting the
size of any correction," said Dariusz Kowalczyk, chief
investment strategist with SJS Markets in Hong Kong, in a
note.
(Additional reporting by Koh Gui Qing in SYDNEY)
(Editing by Kazunori Takada)
